Buying a used car has typically been considered a smart way to save money by avoiding the steep depreciation costs associated with new cars. However, used car prices have risen by 50 percent since February 2020, the month before the pandemic shutdowns threw the global economy into turmoil.
That means you may have to look at older used cars to stay on budget.
Although they are starting to come back down to earth, used cars are still 33 percent higher than before the pandemic started and are likely to stay that way for a while.
The ongoing chip shortage and a limited supply of new cars and trucks sent the demand for used cars through the roof, pushing prices much higher and reducing the value of buying pre-owned cars.
Improvements in the auto supply chains are credited with contributing to a slower-than-expected November consumer price index CPI increase, and a sign that inflation normalization is underway.
The index for used cars and trucks fell 2.9 percent in November, the fifth consecutive decline in that index, according to the U.S. Bureau of Labor Statistics.
Car search engine iSeeCars.com analyzed more than 2 million used vehicles and identified models with the longest lifespan. Then it compared those models with their current used car values to identify and rank the best values for 10-year-old vehicles.
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“Although used car pricing is slowly dropping, it remains near record levels, putting a serious financial pinch on first-time buyers or used car shoppers needing to replace their current vehicle. And new vehicle pricing is simply unrealistic for many consumers,” said Karl Brauer, executive analyst for iSeeCars.com.
Car shoppers can buy a 10-year-old car that costs substantially less than 1-to-5-year-old used models but these older vehicles still have 80,000 or more miles of life left in them, Brauer said in a prepared statement.
“Some 10-year-old vehicles like the Toyota Prius, Toyota Avalon, and Honda Ridgeline, have more than 125,000 miles to go. And all of these top 20 cars provide a potential lifespan above 200,000 miles,” Brauer added.
High-end new cars are not such a great deal. Other than classic cars, most new cars lose their value fast. Depreciation is the highest in the first year (up to 20 percent of value) and continues for about five years, according to The Lending Tree. Over the course of the first five years, the value drops to around 40 percent of the original new-car sticker price.
Some wealthy Americans or Americans who want luxury cars prefer driving Mercedes, BMW and Lexus, but a surprisingly high number of millionaires favor used and cheaper cars over new and high-end automobiles.
According to a study by Experian Automotive, 61 percent of wealthy people drive Hondas, Toyotas, and Fords.
The top 10 cars for $250,000-plus households include the Mercedes E-class, the Lexus RX 350, and the BMW 5 series and 3 series. However, the top 10 list also includes three Honda models, a Toyota, an Acura, and a Volkswagen, Motor Biscuit reported.
iSeeCars identified the top 20 best used 10-year-old cars for the money spanning a wide range of brands and vehicle types from small hatchbacks and midsize sedans to three-row SUVs and a pickup truck. The average price for these top 20 is $12,814, with an average remaining lifespan of 101,923 miles, or more than 46 percent left of their total usable lifespan.
“With financial stakes so high, it’s more important than ever to do careful research,” said Jake Fisher, senior director of Consumer Reports’s Auto Test Center. Consumer Reports suggested considering three key factors in making your decision when buying a used car: safety equipment, strong reliability and age of the car.