Originally posted in July 2021.
The recent shortfall in microchip supply has led to a steep fall in the supply of new cars, pushing used car prices upward. As the demand for cars remains unchanged and the supply drops, the prices for the available vehicles dart skywards.
While supply chain stability is returning following the constraints of the past three years, the impacts of the microchip shortage are expected to persist for years.
Survey of nearly half a million used and new cars
To analyze the price-increasing trend, iSeeCars.com conducted a study involving 470,000 used and new vehicles for sale in June 2021. The research found a narrow gap between used and new car prices. In some cases, brand-new cars cost less than their used versions. So, if your budget matters, these might be the used vehicles you want to avoid.
Methodology:
The comparative research analyzed the average buying price of the used vehicles with the new cars of the same model. For this study, iSeeCars.com sampled 470,000 used and new cars available for sale between 1st and 14th June 2021. The latest vehicles were from the 2020 and 2021 model years, while the used cars were from the 2019 and 2020 model years.
Lightly used pre-owned vehicles had a travel distance within 20 percent of 13,476 typical miles covered per year in the United States, as per the Department of Transportation. The research ruled out discontinued versions before the 2021 model year and low-volume vehicles available.
Findings:
The study found the following 16 vehicles where used versions cost more than the new models.
- Kia Telluride
- Price (New): $44,166
- Price (Used): $47,730
- Used Exceeds New (%): 8.10%
- Used Exceeds New ($): $3,564
- GMC Sierra 1500
- Price (New): $54,205
- Price (Used): $57,671
- Used Exceeds New (%): 6.40%
- Used Exceeds New ($): $3,466
- Toyota Tacoma
- Price (New): $37,902
- Price (Used): $39,857
- Used Exceeds New (%): 5.20%
- Used Exceeds New ($): $1,955
- Mercedes-Benz G-Class
- Price (New): $182,631
- Price (Used): $190,078
- Used Exceeds New (%): 4.10%
- Used Exceeds New ($): $7,447
- Toyota RAV4 Hybrid
- Price (New): $34,995
- Price (Used): $36,352
- Used Exceeds New (%): 3.90%
- Used Exceeds New ($): $1,357
- Toyota Tundra
- Price (New): $49,643
- Price (Used): $51,474
- Used Exceeds New (%): 3.70%
- Used Exceeds New ($): $1,831
- Dodge Challenger
- Price (New): $39,375
- Price (Used): $40,764
- Used Exceeds New (%): 3.50%
- Used Exceeds New ($): $1,388
- Toyota 4Runner
- Price (New): $45,382
- Price (Used): $46,867
- Used Exceeds New (%): 3.30%
- Used Exceeds New ($): $1,485
- Hyundai Palisade
- Price (New): $44,063
- Price (Used): $45,356
- Used Exceeds New (%): 2.90%
- Used Exceeds New ($): $1,293
- Tesla Model 3
- Price (New): $44,409
- Price (Used): $45,677
- Used Exceeds New (%): 2.90%
- Used Exceeds New ($): $1,268
- Honda Civic
- Price (New): $26,331
- Price (Used): $27,058
- Used Exceeds New (%): 2.80%
- Used Exceeds New ($): $727
- Dodge Charger
- Price (New): $38,977
- Price (Used): $39,874
- Used Exceeds New (%): 2.30%
- Used Exceeds New ($): $897
- Honda Odyssey
- Price (New): $37,612
- Price (Used): $38,048
- Used Exceeds New (%): 1.20%
- Used Exceeds New ($): $435
- Kia Rio
- Price (New): $17,346
- Price (Used): $17,472
- Used Exceeds New (%): 0.70%
- Used Exceeds New ($): $127
- Subaru Crosstrek
- Price (New): $29,474
- Price (Used): $29,642
- Used Exceeds New (%): 0.60%
- Used Exceeds New ($): $168
- Subaru WRX
- Price (New): $34,487
- Price (Used): $34,568
- Used Exceeds New (%): 0.20%
- Used Exceeds New ($): $81
At the beginning of November 2020, the used cars cost 10.8% less than their newer versions. However, the study found that in June 2021, this gap narrowed significantly to only 3.1%.
Karl Brauer, Executive Analyst at iSeeCars.com, said: “Used car prices have risen overall, and prices have dramatically increased for certain in-demand models that may be harder to find on new car lots. Dealers may think used car buyers are willing to pay more for the instant gratification of a lightly-used vehicle they can drive right off the lot rather than waiting for a new one.”
How the Microchip Shortage Affected Prices?
We witnessed a global microchip supply shortage from the Renesas plant catching fire in Japan in March 2021. The accident damaged 17 machines, affecting the production of microchips until July. This lack of supply affected the production of new cars, causing manufacturers like Toyota to suspend their production.
Buyers look toward what is already available as fewer cars enter the market. The supply shortage and constant demand had put heavy pressure on the used car market, causing the prices to shoot upward—the new equilibrium price resulted from unchanged demand and a leftward shifting supply curve.
