$47,100 is the average cost of a new car sold in the US.
$28,200 is the average cost of a used car.
Which it’s important to know as a byproduct of manufacturing issues with COVID, used car values went up heavily, where the average used car in 2019 was $17,500.
A 61% hike, which looks likely to go back to 2019 levels in the next year.
I asked people if they’d rather have a $100,000 car which they couldn’t sell or $25,000 cash.
Most said $25,000, but a few wanted the $100,000 car and a small minority weren’t sure.
Most of the people said they needed the money, looking at the numbers, for most people it’s irresponsible to take the $25,000.
Explaining this, 4.1 years is the average age of a used car sold in the US.
It’s also generally accepted drivers average 12,000 miles per year in most parts of the US, putting an expectation of 48,000 miles on a new car.
For cars, the average lifespan in the US on a car is 12 years, where it’s generally expected with reduced driving in the final years, a car will start to be unable to drive at the 200,000 mile mark.
There’s also maintenance, where over a period of five years, a used car will on average cost $1,800 more over a new car.
So why would taking a $100,000 car beat taking $25,000 cash?
- 91.5% of households in the US own at least one car, meaning $25,000 or not, people will still have a car.
- $25,000 still won’t get a lot of consumers a good used car.
- Long term maintenance issues would make it more than expected.
- The car lifespan won’t be as long, where a used car only has 5-8 years left, while a new car could expect 12, meaning the consumer won’t have to buy again.
Which this all sounds silly to write over a little small quiz with friends, but it has a bigger meaning on the economics of buying a car and deciding new vs used.
New cars will cost more to buy, but for consumers who want long term ownership, with maintenance and lifespan, it’s not as much of a deal as people think.