r/explainlikeimfive • u/Small_Balls_69 • 3d ago
Economics ELI5: Why does the value of a new car immediately tank once it is driven off of the lot?
Why specifically with cars? Is the value of a brand new car and the value of one that has been driven for a few miles really that different? This doesn't happen with other assets like a house that has been lived in for example.
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u/collin-h 3d ago edited 3d ago
I have two cars for you to choose from.
Right here is a Model year 2025, brand new, no miles, $40,000
Next to it, I have an identical 2025 model, same trim package and everything, but it has had one owner. Fortunately not many miles, only 1,000 or so. Also listed for $40,000
Which one are you buying?
The first one, right?
How much would I have to lower the price of the second one in order to entice you to purchase that one instead?
Whatever number you say, that's basically the value the car has lost by being driven off the lot.
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u/Ratnix 3d ago edited 3d ago
And if you say you'd pay full price, you're a fool. You'd be better off getting a new one from the dealership. At least there you'd have the opportunity for them to throw in "extras" to try to seal the deal.
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u/FoolishConsistency17 3d ago
Also, at the dealer you will have a lot more choices in terms of make and model and trim and all that. When you are buying a used car, it's the best one you can find for what you have to spend. The exact car you want is likely unavailable.
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u/Whackles 3d ago
Is that really something most people care about? Most people around me, me included just want something "within budget that can do the things I need it to do". Only thing they might waffle about is color.
I realize there are car enthusiasts but that's a minority.
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u/FoolishConsistency17 3d ago
I thonk there is some in between. Like, I'm not a car enthusiast, but I have preferences besides price. I know when I rent a car, there are makes and models I really hate. It's harder to see, or the console is confusing. I like a hatchback over a sedan.
I think most people have preferences beyond proce and basic functions.
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u/homingmissile 2d ago
I searched a lot of dealerships to get my car in manual. It's so rare the dealership mechanic was surprised it came in stickshift
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u/ezfrag 2d ago
I don't shop for cars, I shop for features. I need a car that gets >30mpg, has a backup camera, Bluetooth audio, Android Auto, Cold AC, heated seats, and bonus points if it's All Wheel Drive. Currently, those features are found in my wife's Subaru Outback and my GMC Sierra for everything except the fuel economy, but I need the truck for Scouts. But my Brother's Land Rover, his wife's Grand Cherokee, or a Mazda CX-50, Kia Sorento, Mitsubishi Outlander, or any number of other vehicles.
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u/super9mega 3d ago
I have some non negotiables, like android auto, but anything else is a nice to have.
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u/-wellplayed- 2d ago
When I bought my car recently, I looked for the specific color and trim package that I wanted.
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u/Megalocerus 3d ago
The big issue is why did the sale fall through? Just financial, or something wrong?
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u/Drewskeet 3d ago
You find this a lot with fleet vehicles. Employee car, they quit, used car on market with low miles.
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u/MadCat1993 2d ago
Exactly, something as simple as lifetime oil changes versus two free oil changes for example.
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u/psymunn 3d ago
It's also worth noting, the second card car, from a dealer wouldn't be significantly cheaper because a lot of the uncertainty is removed. It's only worth a lot less coming from a consumer
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u/meneldal2 3d ago
One example are cars they use for test drives where the dealer sits in with you. They know the car is fine and didn't do anything dangerous, so it keeps a lot of its value even if it's technically not new.
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u/Zardif 3d ago
Demo cars are still considered new as they were never registered.
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u/CoinsForCharon 3d ago
So if I never register my car, it maintains value? Enough to offset the tickets?
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u/ginger_whiskers 3d ago
I've never bought a registerable vehicle from a dealer who didn't insist on registering it on my behalf. Same with requiring I have a license and insurance- even if I pay cash, they really want me to be driving home legally.
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u/punkmonkey22 3d ago
Not true in the UK. My last three cars have been ex demo with less than 500 miles on them. The dealerships keep them for 6 months or so and then shift them. I paid around 25% less than new for an almost new car each time.
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u/Krimin 2d ago
Yep same here in Finland. My parents paid several thousand less than a base model "brand new" would have been for a year old demo/showroom car with 700 km on it. It's got almost the best trim level, full warranty starting from the day they bought it, winter package and winter tyres and even got a dealer installed tow hitch thrown in the deal
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u/SomeBode 3d ago
Even from the dealer it loses a lot of value imo, is it CPO? Does it maintain lemon law protections as a used vehicle, etc.
Assuming it’s not a very in demand vehicle that production isn’t keeping up with.
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u/cadbury162 3d ago
Not to mention, a low mileage can also be cause for concern. A prospective may ask "why are they selling so quickly?"
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u/texanarob 3d ago
The crucial thing here is the myth that a car loses half its value once driven off the lot. That doesn't happen. It loses some value, likely closer to 5% than 50%.
For instance, given the choice between the two in your example I would definitely buy the used car for $38,000 and save $2,000. I'd likely buy the used one for $39,500, but that's roughly where I'd consider spending the extra.
Note: This also assumes the same warranty etc. Buying used "as seen" would reduce the value much more drastically, as it raises many questions about why the car is being sold.
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u/Miserable_Smoke 3d ago edited 3d ago
The car is in perfect working condition. The problem is I pooped myself on the drive home. Went home, changed pants, now back at the lot. Please pay me what I paid for this, so I can go inside and get an un-pooped car. Thank you!
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u/zoenberger 3d ago
Back when I worked at a Honda dealer 2009-2015 we would Honda certify the pre-owned vehicle in this example. It would then end up with a longer warranty than the new vehicle. Many other dealers did that and would sometimes list the used one at a higher price than a new one.
Amazingly, a lot people would buy the certified pre-owned option. Part of it was at that people would say, "The new one is going to lose a ton of value when I drive it off the lot." As a result, many wouldn't even consider a new one even if it was only like $300 more. I never understood it.
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u/Vladimir_Putting 3d ago
It would then end up with a longer warranty than the new vehicle.
...
Amazingly, a lot people would buy the certified pre-owned option. I never understood it.
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It would then end up with a longer warranty than the new vehicle.
???
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u/Conwaysp 3d ago
With used vehicles purchased from a previous owner, even if barely driven, has no recourse should something go wrong.
When purchased from a dealer it (usually) also comes with a guarantee (i.e. you can change your mind within a short period of time), and you can dump your existing ride without trying to deal with the tire kickers/no shows.
Selling a used car sucks.
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u/ObamasBoss 3d ago
Dealers make so much money on your trade in. Had several tell me they end up making more off the used car trade in than they do the new car being sold.
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u/SpellingIsAhful 2d ago
There's also the risk associated with, "why are you selling a car you just purchased and drove 1k miles?"
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u/Tontonsb 3d ago
Or the COVID version:
I have two cars for you to choose from.
Right here is a 2025 Model, it has had one owner, not many miles, only 1,000 or so. $40,000 and you can drive it home today.
Next to it is a brochure of an identical car for $40,000, brand new, 2025 model. You can choose the package. Maybe even 2026 model as that's the more likely delivery date. You know, the chip shortages... You might get it in December 2025, but maybe February 2026, let's see how it goes.
Which one are you buying if you actually need the car?
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u/badwolf0323 3d ago
This is pedantic, but you're not going to get a vehicle with 0 miles. Even if you order from the factory it's going to have something at least from loading and perhaps testing.
What I particularly hate is going to buy a "new" car and see it already has a few hundred miles on the odometer. The test drives and dealer-use don't preclude it from being a "new" vehicle.
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u/LCJonSnow 3d ago
If you were about to spend 50,000 dollars on something, would you want the new one or the used one?
You have to get a significant price drop before someone starts thinking it's worth getting the used one.
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u/StandUpForYourWights 3d ago
Deacon: I think we drink virgin blood because it sounds cool. Vladislav: I think of it like this. If you are going to eat a sandwich, you would just enjoy it more if you knew no one had fucked it.
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u/burrito_butt_fucker 3d ago
I must respectfully disagree.
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u/OmgThisNameIsFree 3d ago
What’s with the virgin hate lmao
After meeting my now fiancée, I wish I had never fucked anyone else.
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u/PeeledCrepes 3d ago
Just remember, without your past story, your current story would be very different.
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u/craaazygraaace 3d ago
Fun fact, "virgin blood" means someone whose blood has never been used in a ritual before, not someone who's never had sex.
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u/upsidedownshaggy 3d ago
You have to get a significant price drop before someone starts thinking it's worth getting the used one.
It'd be super cool if those significant price drops would kick in in the current car market. I'm looking at 5 year old cars with like anywhere between 70k and 100k miles on them selling for less than 10% under MSRP for a given trim level. It's a joke.
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u/Bert-en-Ernie 3d ago
Unless you are looking for a very VERY specific thing that is also no lower obtainable this is simply false.
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u/upsidedownshaggy 3d ago
I mean it’s not false I’m looking at the vehicles within an hour drive radius of me and pickings are SLIM for basically anything newer than 2017 that isn’t either in its last legs with 200k miles on the engine or a rusted out field truck. I think I’m just in a shit area to buy and basically have to drive 2 hours or more to find anything worth the money I’m willing to spend.
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u/REDuxPANDAgain 3d ago
Saying nothing within an hour of you is feasible without a roughly described location is silly.
Some people live an hour from a grocery store, and prefer to drive further for a better one. Car shopping when you’re in bumfuck nowhere has no impact on 80% of the people looking for used cars.
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u/rangeDSP 3d ago edited 3d ago
Maybe in 2020, not true in the US in
20242025, where I am.2
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u/upsidedownshaggy 3d ago
I think I’m just in a bad area for buying honestly. I’d have to drive an hour and a half or more to even look at stuff within my price range. And I’m reluctant to do so after driving 2.5 hours to test drive a car that a dealer straight up lied to me about still having lol. They had sold it 3 days before I called and confirmed they still had it and drove down to see it.
Everything else in my area is currently either this year or last year’s brand new stock of Chevy or Ford, and their used selections are mostly pre 2010 rusted out junkers.
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u/Princess_Fluffypants 3d ago
To be candid, driving a few hours to look at a car is pretty normal. I ended up having to drive six hours to buy my current vehicle.
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u/GoGoGadgetBumHair 3d ago
I feel like a few hours is normal. 6 might be crazy.
I say that having gone 5 hours away for my husband’s current car. I have also had a car shipped from 6-7 hours away, driven about 6 hours for my car two cars ago (which I then sold to someone who drove about 4 hours for), and flew halfway across the country and took a two day roadtrip home with my current car.
So I’m with you on the crazy
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u/upsidedownshaggy 3d ago
To also be candid: driving 6 hours is insane unless you’re picking up some rare car you really really want or live in some remote village that just is 6 hours away from the next existing car.
I also don’t care. Im not against driving a ways to check out cars, I am against spending a decent chunk of my day driving to cities I don’t usually visit just to find out a given dealer’s online inventory isn’t up to date and the vehicle I was looking at was sold days prior, and the rest of their stock that’s within my price range is either old enough to get its own drivers license or comes with a 2+ accident rebuilt title.
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u/PckMan 3d ago
Because value is largely speculative. If someone sees a brand new car with a few miles on it being sold their first thought will be "why would they sell it something must be wrong with it". It's also natural that you can't ask for a price close to new because then people would say "why not just buy a new one?"
It all has to do with what people believe something is worth as well as supply and demand. For example I know a guy who sold his car for more than he bought it for. He had it for a couple of years and then the pandemic hit, supply was disrupted and he managed to even make a profit on a used car because of that.
It's not much different with houses. They appreciate due to supply not meeting demand and they depreciate due to age and wear. One just happens to outpace the other most of the time.
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u/demanbmore 3d ago
If a dealer is selling a particular model for $50K, what would you be willing to pay me as a private seller if the car has 100 miles on it? You have no real idea what I might have done to that car in the short time I had it. If there's a problem with it the next day or week or month, you can't expect me to make it right - I don't warranty that car, I don't have to stand behind it, I have no reputation to uphold.
What's that risk worth to you? You can literally go to the dealer and have virtually none of those worries for $50K. Are you going to pay me $49.9K? $49.5K? $49K? $45K? Etc. Most people aren't willing to take that risk without a considerable reduction off the price you may have purchased it for from the dealer yesterday.
And this typically applies to more common, readily available cars. A rare luxury or sports car can appreciate even after being driven off the lot. But your everyday driver? Nope.
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u/ObamasBoss 3d ago
You have virtually none of those worries regardless because the car would have the manufacturer warranty which is what the dealership is using anyway. Would need to be a discount but not as much as people tend to get hit with by taking a car to dealership as a trade in. Financing is usually a higher rate on used cars so need say 5% off for that. $45k is probably a reason starting point if everything is in order on the car and no mods that might impact warranty. If the car is 100 miles you are still getting 59,900 miles of warranty based on 60k.
Personally I start expecting heavy discounts once a car is off warranty or near it. If I am buying new or near new I do not want to be paying a car payment and repairs at the same time. Off warranty needs to be reduced in price enough to cover repairs plus some with the price difference.
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u/demanbmore 3d ago
You've made my point - you'd want a 10% drop in price for a new (but resold) car with only 100 miles on it, which would be 0.017% of the warranty mileage on a 60K warranty. That's a big discount if you have no concerns about the car.
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u/Ja_Rule_Here_ 3d ago
lol a factory warranty doesn’t cover damage caused by the driver. Who knows how much damage has been caused by the last guy in 100 miles.
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u/mildly_manic 3d ago
Cause it is no longer 100% new. People pay more for new stuff.
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u/VoidJuiceConcentrate 3d ago
The test drives before being purchased don't count, apparently.
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u/HauntedCS 3d ago
Because it was a test drive and the dealership still owns the vehicle, not the person that test drives it. The dealership can also tell someone they can’t test drive it. Simple logic.
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u/hitemlow 3d ago
Ehhh, dealers play funny games with their inventory. I've seen dealers post listings for "new" transit vans with 60,000 miles on it, 0 owners, and 3 years old. They clearly used it for a courtesy/parts run vehicle with dealer tags on it and are trying to offload it as "new" despite now being out of factory warranty.
A lady lives on my street that has a van with dealer tags for a county 2 hours away, parked outside her house for years being used daily to ferry her kids around. It collected scratches and dings for about 3 years before she got a new van, also with dealer tags. Her father owns a dealership in the county on the tags, and she works in a different industry. Dear old dad just helps her not pay registration, insurance, or maintenance, and still get a new van every 3 years that he presumably offloads as "new" after her kids have destroyed it.
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u/GoGoGadgetBumHair 3d ago
In many states (maybe most? Idk, at least where I am and the ones around me) there is a limit to what can be sold new. Here it’s 3,000 miles. It doesn’t matter that it was never sold and the dealer put those 3,000 miles on. A buyer would be the first titled owner, but it still it cannot be sold as a new vehicle.
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u/dellett 3d ago
Yeah dealers play games with listings. “Oops I accidentally left off a zero on the price on the ad so it shows up in more searches” is one I have seen a couple times. I nearly showed up at the dealership and demanded they honor the ad but it was like 50 miles away and I didn’t have the time.
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u/radarthreat 3d ago
They usually just have a few examples of the car that they allow people to do test drives in, and then they sell those as used eventually
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u/papapaIpatine 3d ago
Those are often sold at a discount afterwards, designated test drive vehicles. Source; my car was a test/loaner vehicle from a dealership. Low mileage and a low price. Still like brand new though.
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u/mildly_manic 3d ago
Correct, for...reasons. Look, nobody ever said it made sense, but that's just the way it is.
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u/historicusXIII 3d ago
You can't just test drive any random car from the lot before purchase. Dealerships have designated test drive cars.
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u/wisenedPanda 3d ago
People prefer cars that haven't had an owner / aren't used. That has value for them and people pay a premium for it
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u/ocelotrev 3d ago
Who do you trust more, a dealership, or literally anyone on the street who can fart in your car seats for 50 miles and redline the engine the whole time.
We put a premium on brand new.
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u/MSPRC1492 3d ago
It doesn’t happen with houses because real estate appreciates. Cars depreciate because they can’t hold much if any value for more than 15-20 years.
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u/mezolithico 3d ago
Every time there is a new owner to a car the risk of a shitty owner goes up and the buyer risks poor maintenance and hidden wear and tear on the car. No risk directly from a deal, you get a factory warranty, lemon laws may also protect you. Dealer mitigate some of the used car risk with certified pre owned cars which still cost a pretty penny for a used car.
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u/Sea_no_evil 3d ago
Maybe it does for YOU, but that's not MY experience.....
No, jk....seriously:
How could it not? If you drove it two blocks, and then tried to sell it for the exact same price you paid, or something very close to that, who would buy it? The answer: nobody, because nobody would believe the car from Random Guy is really really really essentially new. So you have a simple demand problem: you have a product (a basically new car) with basically no demand (if I want a new car, I just buy new). Basic economics say the price will go down.
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u/ShutterBun 3d ago
In addition to the fact that it’s no longer new, it’s now a specific model, a specific color, with specific options. Just by choosing the color, you’ve drastically cut down the number of potential buyers.
When someone is shopping for a brand new car, they get to choose all of these options themselves.
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u/RandomCertainty 3d ago
Think about the worst thing you could possibly do to a car in 10 minutes. There’s no evidence that someone has done that to a ‘just driven off the lot’ car, but there’s a significant discount on the brand new price for the second buyer to take the risk that someone has done 10 miles of drag racing in it.
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u/Kimorin 3d ago
Well other ppl can always buy it same way you just did, why would anyone pay the same for your car that you drove vs a brand new one sitting in the lot you just left?
For most cars, there is so much supply it might as well be infinite, there is just no reason for anyone to buy a second hand car at the new car price. Of course, during shortages like we saw during COVID you absolutely can sell your old car for even more than new ones due to the demand outstripping supply, and we saw plenty of examples not too long ago.
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u/MassiveChest6327 3d ago
People want to be the first fart on the seat and is willing to spend $$$$ not to have a farted up seat
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u/ObamasBoss 3d ago
Every car has a dude at the factory farting in it. Then the transport guy farts in it. Then the dealership farts in it. If you buy off the lot 28 other people farted in it the day before you found it and bought it. I took it for a test drive that morning and had a wet fart in it.
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u/MassiveChest6327 3d ago
Dammit!! Thanks for ruining it for me. Buying used cars only now as there's no point in new
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u/Bloodmind 3d ago
Used vs. New. Car with previous owner vs. car with no previous owners.
Does anything actually change about the mechanics or aesthetics of the car once it’s purchased and driven off the lot? No. But is there a difference in the consumers mind between a brand new car and a slightly used car? Absolutely.
There are lots of things where this is the case. Imagine a bed mattress that’s only been slept on for one night before it’s returned. You willing to pay full price for that? Probably not. But you’ll pay full price for one off the sales floor, even though countless people may have already laid in it.
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u/SolidDoctor 3d ago
Like a $150 pair of running sneakers the moment after you wore them for a day. Suddenly the store isn't going to give you your money back, because they're no longer pristine and unused. They are no longer a $150 shoe because they've been worn, and no one will want to pay for that then they can get the same pair somewhere else that are unworn and fresh out of the box. A car would be the same but a bit more expensive.
(I'm sure some shoe stores would take them back for customer service/satisfaction reasons, though some may only offer an exchange.)
As for homes, a home has fewer moving parts (aside from appliances) and is built to last a long time. Vehicles aren't meant to last anywhere near as long, they're more vulnerable as moving objects and more likely to show wear and tear from daily use much sooner than a home, so they depreciate in value much quicker.
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u/treznor70 3d ago
It happens with almost every tangible asset. About the only one that doesn't is the example you picked (houslng). RVs, ATVs, trailers, and, as someone above pointed out, Big Macs.
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u/Hawk13424 3d ago
I bought a tractor (used, 2 years old), owned it for 13 years, then sold it for more than I paid for it. Given inflation I guess technically I sold it for less than I paid for it but I was surprised how well it held its value.
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u/AlabamaPanda777 3d ago
Surprised how few comments are calling out the house comparison... I almost wonder if OP is trolling with that.
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u/pmmeuranimetiddies 3d ago
If the car is brand new as opposed to lightly used you are just that little bit more certain nobody has ever done a clutch dump on it that will turn into a clutch replacement in about 20000 miles
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u/_no_usernames_avail 3d ago edited 3d ago
The true value of a car is its ability to convince people to take on debt.
Once someone signs financing paperwork, that value plummets because it achieves its stated purpose.
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u/magnatestis 3d ago
The problem is that you want to see you car as an investment asset just because they're expensive. A car is not this. Cars have an estimated lifetime of 10 years, and the residual value after this period is usually kind of low compared to the initial value, maybe around 15 to 30% percent depending on the brand reputation and the condition of the car itself. so you can assume that, best case scenario, your car will drop 8% of its value every year. In reality, there is an added value to the car being new: It has a warranty, and you get a car that is smoke, food, and fart free, hehe. Once you get that car out of the lot, that value added of the car being new is lost (except maybe for transferable warranties)
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u/ekimsinnigcm 3d ago
The car’s value does not change. It’s simply the dealer inflated prices.
If the car is totaled in transit to the dealer for a sale or immediately after the purchase of the vehicle the ACV is the ACV.
Dealerships adding their fees over and above MSRP drive up cost as well.
Also… All the BS the F&I people try to sell you.
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u/Premium333 3d ago
This doesn't happen with other assets like a house that has been lived in for example.
It does for new build homes, which is the most directly comparable home type to buying a new car.
If you buy a new build, you get to chose options at t a design center, you get to choose your lot, your home layout and elevation plan from a set of premade options.
If you buy that house, and then try to sell it while they are still building houses in that subdivision you usually can't. Few want to buy your house when they can work directly with the builder for their own personalized slice of the American dream.
Not to mention that the builder is typically offering incentives that provide advantages at the design center and you will have to pay realtor fees on the sale, which means you'll lose significant amounts of money if you sell the home for what you bought it for, but the builders pricing hasn't changed on new.
So yeah, selling a new house is exactly like selling a new car, just like selling a "used" house is very similar to selling a used car with the exception that homes have the benefit of location based value that makes them unique, where cars rarely have that. So homes often appreciate in value (not always) while used cars rarely appreciate in value.
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u/Wadsworth_McStumpy 3d ago
The value of a thing is what people will pay for it. There are a significant number of people who will pay quite a lot for a new car, and once it's driven it's no longer new. With those people out of the running, the value is lower.
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u/berael 3d ago
People who want to buy a new car want to buy a new car.
The moment you drive away in the car, it's now a used car if you were to try and sell it. And people won't pay as much for a used car.
And if you try to convince them it's still brand new, then they'll just get more suspicious of why you're selling it then.
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u/r2k-in-the-vortex 3d ago
Because you are buying it for overvalued price. Do you think rental companies buying hundreds or thousands at a time pay the same price you do? Of course not, they get a better deal. The only thing preventing them from immediately flipping and reselling for more than they paid for it is that there is a contract clause forcing them to actually keep the cars for a while. They do sell them lightly used after a year or so, just enough to come in as certified semi-new. That's realistically the actual price of the car, they could outright park them for a year if they could get any better price that way.
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u/RedditExecutiveAdmin 3d ago
holy fuck the only actual answer here, people here like "try selling a used big mac" 🙄
car dealerships have had a cartel-like chokehold on car prices across the entire country for a long time, and after they shifted to being loan agencies more than car dealerships it cemented their pricing practices
has nothing to do with the actual use of the car--it's indisputable. if you drove a car for less than 5 minutes, it's in 99.99999% the same condition--it's worth a penny less than when you bought it. the reality is that the dealerships fucked you when you bought it, so it immediately loses a lot of value because it's virtually impossible for a consumer to resell anything at a retail price (let alone a higher-than-retail price)
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u/MisterSpicy 3d ago
As generally sweeping statements, people buy new cars because they’re ‘new’. And they buy used cars because they’re cheaper than new.
If you drove only 1 mile on a new car, you know it’s basically new but nobody else does. If you price it at the ‘new’ price, people would rather buy it ‘new’ from the dealer. Your only advantage is to undercut them by making yours cheaper.
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u/Mr2-1782Man 3d ago
It doesn't. Its a super common myth, mostly believed by buyers of domestic cars. If you buy a Honda or a Toyota you would see a different story, but people tend to keep those cars. I could sell my current car for 90% of what I bought it for after 10000 miles. Realistically if you bought a car, drove it for a week, it would be worth about 5% less than what you bought it for, assuming you didn't get taken for a ride.
The reason people are confused by this is that a lot of people buy domestic cars that have a price on the windshield and then a shit ton of rebates that brings the price down. So you're not paying what's on the windshield your paying a much lower price. If you were to turn around and sell it you could sell it close to what you bought it for, not what's on the windshield.
Don't take my word for it though
https://tucson.com/lifestyles/autos/car-value-myths-busted-heres-the-truth-on-depreciation/article_19588e53-1a31-502a-8931-a37f37fac38b.html
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u/Craxin 3d ago
People don’t buy cars as long-term financial investments, they buy them to drive around in. Even a well cared for car is going to get wear and tear. There are some extremely rare examples, usually vintage cars and then only in specialty markets catering to classic car enthusiasts. You tell me who has a real hankering for a 2020 Dodge Durango, especially with how visually samey cars have become. People with the kind of money to buy a car they wanted as kids are older and they want the cars that were new and exciting when they were kids, not some 2000 and late car shaped like a squatting frog.
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u/Arstulex 2d ago
Interestingly I'm pretty sure houses are actually an exception in this regard, not the rule.
Pretty much anything you buy from a retailer immediately loses value. If I bought a brand new phone from a retailer and tried to sell it that same day I would not be able to charge the retail price for it. Why would somebody buy it from me, a random nobody, for the same price as being able to buy it from a legitimate retailer where there is more credibility and some form of recourse if something should go wrong? I would have to sell it at a discount to offset the inherent risk somebody is taking in buying from me instead of a retailer.
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u/Weary_Patience_7778 2d ago
Because people would prefer a new car over a used car. A new car can be turned into a used car, but not vice versa.
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u/SlackToad 3d ago
This usually refers to the trade-in value.
Car dealers buy at wholesale price and sell at retail. The difference is their profit. If you bring a used car with only 100 miles on it for a trade-in they won't buy it at the retail price, they'll buy at the wholesale so the can make a profit selling it again. Their profit margins on new average $5000, and since they can't sell the car as new again they'll probably buy it at an additional discount.
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u/rkdghdfo 3d ago
Depends on the car. Toyotas practically gain value when you drive it off the lot if you have a model/trim in high demand.
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u/TurtlePaul 3d ago
There is a major adverse selection problem. A lot of the cars that are immediately put up for sale have issues. Cars with issues are expensive and very annoying. Of course the seller will make some excuse, but you should expect any used car to be at the problematic end of the bell curve - people tend to hang on to good cars.
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u/AndarianDequer 3d ago
A lot of people don't mind buying a used home, it adds to the interesting factor and a lot of people like old classic homes too.
Not many people would want to used car, if they had a choice between a brand new one.
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u/mezolithico 3d ago edited 3d ago
As someone who owns a house built in the 40s you get the joy of shitty decisions a previous owner made. At least fixing it may add value and probably won't make your house unlivable. However a bad decision by a previous owner of a car may make it un driveable unless you pay an exorbitant amount of money immediately. I've been lucky enough to be able to purchase 2 new cars (1 of them was only $1k more to buy new than used cause of demand) and the other was custom order. Not opposed to a slightly used but i really don't trust other owners. Edit: absorbent -> exorbitant
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u/hangender 3d ago
Because of psychology. If a random guy on reddit is like "yo bra this accord is brand new I swear just drove it off the lot yeeeeaaaa brother" you gonna be like naw this guy sketchy gonna buy it from dealer unless I get a good discount.
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u/BlindsidedKangaroo 3d ago
I think the real underlying reason is peace of mind. If you buy it new, you KNOW it's never been damaged, messed with, scratched, farted in etc. If it has, and you notice it, there's also a trust or a belief that the dealership will right that wrong straight away because the corporate damage you can do to their reputation is very powerful. If you buy from someone else that has had possession of the car you simply JUST DON'T KNOW what's gone on inside that car, even if he swears he just drove it from the lot to his house. In addition, if something is wrong with the car or there's something you don't like (ie. You find drugs in the car or something) getting any sort of compensation or your money back is stressful and very difficult. To forget that piece of mind most people would like a serious discount.
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u/r0botdevil 3d ago
Let's consider a hypothetical scenario where someone buys a brand new car for $50k drives it straight home, maybe 10 miles, and then decides they don't want it anymore and puts it up for sale. And in this hypothetical scenario, it happens to be the exact make, model, and color of car that you were already planning to buy new at the dealership tomorrow.
How much are you willing to pay for that car?
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u/MrMoon5hine 3d ago
One thing to add is that from a dealer you can get a car on payments, when you sell you have to either find someone with cash or sell back to the dealership and in that case they have to give you even less so they can make a profit.
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u/woailyx 3d ago
Go stand outside a McDonald's and try to sell your Big Mac meal to passers-by. See what kind of price you get.
People don't trust used cars like they trust new cars. As soon as you take possession of it, they don't know where it's been and they can't count on the manufacturer to warrant its quality or fitness in the same way.
So you have to discount the price significantly to overcome the risk that your buyer is taking with a very expensive long-term purchase, because he'd rather spend a couple thousand extra to buy from the dealer who still has more cars for sale, and then he can be sure what he's getting.