Buying a car in 2022 is hard. Deciding if you should buy a new or used vehicle is even more difficult. Used car prices have increased unlike any other time in history, and the new car shortage means you may need to wait months to take delivery of an ordered vehicle.
While in years past the answer to “should I buy a new or used car” was more obvious, today it is trickier to answer. Let’s break down the pros and cons of buying new and used and what our recommendation is here at CarEdge.
Let’s dive in.
The case for buying a new car
You might feel a little crazy if you buy a new car in 2022 … Just a few years ago, the idea of paying MSRP for a new car was unheard of. Today, paying MSRP is a deal.
Car dealers nationwide have been adding additional dealer markups (ADMs) to their vehicles. For many brands, the average transaction price is well above the original vehicle’s MSRP.
If new cars are selling for more than MSRP, how could it possibly make sense to buy one in this market? The case is quite simple; if you can find a dealership who will sell you a vehicle at MSRP (and in some cases below it), then you should jump on it.
It is widely expected that automakers will significantly increase their MSRPs for the 2023 model year. We have already seen many manufacturers increase MSRPs during the 2022 model year.
Pair this with the reality that used vehicles are appreciating assets, and you can begin to see why purchasing a 2022 new vehicle at MSRP is a relative “bargain”. New vehicles come with the full manufacturer warranty and typically are eligible for special financing through the manufacturer’s lending arm. Used vehicles are selling for the same price as new vehicles and they don’t have those benefits. For this reason, if you can find a dealership selling a vehicle at MSRP we recommend you strongly consider it.
To find a dealership selling at MSRP we encourage you to search our community-driven dealership reviews. Research over 1,700 reviews that have been submitted by other community members.
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The case for buying a used car
What is the rationale for buying a used car in 2022? Price. If you cannot afford a new vehicle (which is understandable since the average transaction price in April 2022 was $42,000), then older used cars become your only option.
Sadly, 8-16 year old used cars have seen the most rapid price appreciation so far in 2022. This is because many people are looking for under $20,000 price-point vehicles and their only options are older used cars.
If you are looking for a vehicle in this price range it is critically important that you do your due diligence before purchasing it. Pre-purchase inspections are non-negotiable in today’s market. We have heard many horror stories of “junk” cars being sold to consumers, and the best way to protect yourself from that happening is to get an inspection done before you purchase.
Not all used cars have appreciated equally. Gas guzzler vehicles have depreciated in 2022, while compact and subcompact sedans have appreciated. The trade off here is obvious; save money by spending less on gas guzzler vehicle, but spend more on fuel, or spend more on a more fuel efficient smaller car and save on fuel.
Buying a used car in today’s market is incredibly challenging.
Should I buy a new or used car — why we recommend new
If you’re reading this blog post, the odds are high that you already knew it is a tough time to buy a new or used car. Unlike in years past where the financially prudent decision was to buy a used car, we think it makes more sense to buy a new vehicle in 2022. While that’s easier said than done, we think it will pay off in the long run.
If you cannot afford a new vehicle, then finding a used vehicle that passes a pre-purchase inspection is your best bet.
As always we recommend going through Deal School before you contact any seller, and please don’t hesitate to post on the free community forum to get help. It’s a challenging market, but we’re here to help.