Some new-car deals beat buying used

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Prices for used cars are surprisingly high, and in some instances it might be less expensive to purchase a new vehicle, according to Edmunds.com, the auto information company.

One reason is that automakers often subsidize the interest rate on a loan for a new car. Used-car loan interest rates are typically higher.
Edmunds says this scenario plays out for a number of vehicles, including some luxury cars such as Audis and BMWs. For example, the payment on a manual-transmission BMW 128 coupe would be $506 a month assuming no down payment and a 60-month loan. The payment on a 1-year-old 128 coupe, also without a down payment, would be $534, Edmunds estimated, based on a review of transaction prices and interest rates.

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Overall, Edmunds said, the average price of a 3-year old car is 11.1% higher than it was last year, which it called “a remarkably high year-over-year increase.”

Used cars of all ages are 5.5% more expensive than they were last year. Typically, the year-over-year increase is less than 3.5%, Edmunds said.

“Frugality is in fashion, and a used-car purchase looks and feels more thrifty,” said Jessica Caldwell, an Edmunds analyst.

“However, a number of people are researching used cars on our site but then ultimately buying a new car, swayed by the limited used inventory available and the minimal difference between the prices of lightly used cars and their heavily incentivized new counterparts,” Caldwell said.

The resurgent General Motors, which emerged from bankruptcy last year, has seen some of the most dramatic examples of used-car price increases. Used GM vehicle prices have risen 7.8% in the last year, mostly because of the automaker’s full-size trucks and SUVs, Edmunds said.

It cited the example of a 3-year-old Chevy Silverado 1500 truck, which on average has a price 23.7% above last year.

During the same period, the prices of used cars from Honda increased only 2.3% and Toyota’s declined 0.9%, Edmunds said. Still, it said, those makes have among the best resale prices in the industry,

-- Jerry Hirsch