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January 5, 2024

It’s been a tough few years for car buyers. Pandemic-related chip shortages sent car prices soaring. Russia’s invasion of Ukraine in 2022 only made things worse.

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However, the dust may be settling on car prices — especially used car prices.

According to CarGurus, the average used car price has been on a downward trend since last summer. As of 2 January 2024, it’s $28,247.

While that may sound high, it’s nearly $20,000 lower than the average new car price, which is over $48,000, according to Consumer Reports.

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The truth is that buying a used car is almost always cheaper than buying a new one (unless it’s a luxury or collectible car that appreciates in value). It often means getting more bang for your buck.

But now that used car prices have fallen more rapidly than new car prices have, buying a used car may be an especially good deal.

On top of the lower sticker price, used cars have other cost benefits. For one, they depreciate at a slower rate. According to Kelley Blue Book, cars typically depreciate by 20% in their first year (about 11% is lost as soon as you drive the car off the lot). After that, they lose about 60% of their value within the first five years (about 10% per year).

This means that buying a brand-new car makes the least financial sense because you’re taking the biggest immediate loss. For example, 11% on a $50,000 car is $5,500.

By buying a car that’s at least a few years old, you’re letting the previous owner take the biggest depreciation hit.

According to Tiger Okeley at used car dealership Oak Motors, “Depreciation is an unavoidable part of car ownership. But savvy buyers know they can get a major discount by buying a used car with under 60,000 miles (the equivalent of the average annual mileage of 12,000 miles x 5 years). It costs far less than a new car, but it’s still in relatively good condition.”