A remarkable thing is happening—used cars are appreciating.
Usually, they depreciate—a fancier way of saying they lose value—traditionally, almost immediately, and ongoing. So as you drive, the less the car has worth.
Suddenly, used vehicles are increasing in value or rather, cost, to a degree never seen before. The Manheim used car index, which works like the consumer price index applied specifically to used vehicles, notes an almost 50 percent jump in the indexed value of the average used vehicle over the past year.
The spike it’s almost a vertical ballistic trajectory that began at the beginning of 2021, interestingly enough. But, even more interesting, the spike is general.
It is one thing for a specific make/model used car to go up in value. An example is a car or truck version that people like better than the new version of the same thing.
Now, it’s a different and perhaps not as desirable a thing and a more expensive thing.
And that is what’s happening now to all used cars. They are going up in value because people increasingly don’t like or simply can no longer afford new cars. Part of the reason for the not-liking arguably is because of the over-the-top electronic nannying that comes standard with practically all new cars.
Older cars lack “advanced driver assistance” technologies. They don’t attempt to countermand your steering or apply the brakes on your behalf, or automatically shut off the engine every time the car stops moving. They don’t put the transmission into park because you tried to back up with the door open to use your eyes rather than a camera and beeping electronics to see where you want to go.
Some of the latest new cars won’t drive unless you “buckle up” for “safety” first.
The car press bow-wows these “advanced” technologies, but how many car buyers want to buy cars with this kind of tech attached? It would be interesting to find out, but it’s very hard to fathom because, in most cases, these features are part of the deal; you can’t buy them without buying the car.
Many buyers apparently are doing precisely that by purchasing an older used vehicle instead.
There are also related reasons for the rush to used. Among these is a buyer’s leeriness of new cars’ increasing disposability due chiefly to their elaborate, vehicle-specific electronics. In addition, people are hearing about replacement costs and wanting no part of a vehicle that may be more expensive to fix than it is worth to keep once the warranty runs out.
There are also the exorbitant peripheral costs of buying and owning any new cars, including the outrageous taxes applied at the time of purchase and then every year after that in states where an annual property tax is extracted. These are based upon the “book value” of the car. A new car can cost you more in taxes over five years than it costs to buy a decent used car itself.
Many people are simply no longer in a position to hemorrhage, say $500-plus (or more) each year just in taxes (plus the payments) for the next five years until the value of their new car goes down, and with it, the tax due to the artificially imposed economic devastation of the past year-plus. So it is not surprising they’re looking for ways to save some money by not buying a new car.
They also have less money. Or rather, their money buys less and less.
Rising inflation is not unrelated to the rising values and the cost of used cars. For example, the same used car that sold for $8,000 six months ago now sells for $9,000, not so much because it’s worth another $1,000 but because it now takes $9,000 to buy what used to cost $8,000.
Just as a sheet of 4×8 plywood that cost $20 last year now costs three times as much. It’s not so much the item’s value that’s gone up, but the purchasing power of the “money” we use as “legal tender” has waned.
New cars are also costing more, too, in real terms, not adjusted for inflation.
The rate is not as ballistic, but it is incrementally steady. This is due to the steadily, inexorably increasing cost of government compliance, necessarily folded into the price you pay. The many federal safety, emissions, and mileage regs manifest in cost-adding hardware such as smaller engines with turbochargers.
And aluminum bodywork, which costs more to manufacture and is more easily damaged and more expensive to repair (and so, insure), costs you more, several times over.
Buyers aren’t asking for tiny turbocharged fours in place of V6s without all the peripherals or automatic transmissions with seven, eight, nine, and ten speeds. Nor for aluminum truck bodies or direct injection rather than port fuel injection and the additional/secondary port fuel injection circuit needed to correct the carbon-fouling problems created by direct-injecting the engine.
But these additions are increasing because they are necessary to meet government approval.
Meanwhile, car companies use their new cars to make money by selling you after buying the car. By selling data about you, mined from the car without your knowledge or your consent.
It appears more and more potential new car buyers do not approve and are expressing their disapproval by not buying in.
This has created a unique and unprecedented feedback loop that’s waxing seemingly with every passing day. And which may wax beyond all prior conception given the built-in supply problem with not-new cars:
They aren’t making any more of them.
Eric Peters lives in Virginia and enjoys driving cars and motorcycles. In the past, Eric worked as a car journalist for many prominent mainstream media outlets. Currently, he focuses his time writing auto history books, reviewing cars, and blogging about cars+ for his website EricPetersAutos.com.
Editor’s Note: The opinions expressed in this article are those of the author.