A global shortage of microchips since last year has forced automakers to cut back on new car production, therefore causing prices of used cars to surge to a point where some popular models are fetching higher prices on second-hand markets than their brand new counterparts.
A lightly used Tesla Model 3 sedan, for example, now costs an average $1,300, or 2.9 percent, more than the brand new version sold on Tesla website, according to a study by the automotive research site iSeeCars.com that analyzed over 470,000 new and used cars from the 2019 and 2020 model years listed for sale in June 2021.
“Buyers are willing to pay extra for a used Tesla Model 3 because the Model 3 is still relatively uncommon in the used car marketplace. And despite the high resale value of its used versions, it is the most affordable Tesla available,” iSeeCars Executive Analyst Karl Brauer told Observer. “It appeals to a wide audience from tech enthusiasts to eco-minded consumers to those who want a fun-to-drive sporty car.”
A Model 3 sedan currently retails for anywhere from $35,690 to $52,690 (after government incentives and gas savings). An average new Model 3 in iSeeCars’ study sells for $44,409, while a lightly used version is listed for $45,677.
Avoiding a seven- to 11-week wait is the main motivator for people to pay a little extra on a second-hand Tesla. “Buyers are likely drawn to buying a lightly used Tesla Model 3 on a lot rather than waiting weeks for the delivery of a new vehicle,” Brauer said in a report of the study.
Model 3 is the only Tesla car the study looked at. But it may not always be the most popular Tesla car on the used car market. “Given the popularity of SUVs, the Model 3 will likely lose some of its popularity to the Model Y as that vehicle enters the used car marketplace in the coming years,” Brauer said.
Other popular cars whose used versions are more expensive than new ones include Kia Telluride (which sells for 8.1 percent more on the used market), GMC Sierra 1500, Toyota RAV4 Hybrid and Mercedes-Benz G-Class, among others.
In some cases, such as Kia Telluride, rising used car prices is a result of dealers charging over market retail prices for new models due to high demand. “The price hikes have trickled down to the used car market, where used Tellurides aren’t yet abundant and buyers may be willing to overpay for a used version that is likely the only one available,” Brauer said.”
Overall, used cars are still cheaper than new ones, as the basic laws of economics would indicate. But the price gap is narrowing. In the first half of June 2021, the average lightly used car cost only 3.1 percent less than its new version, compared to a 10.8 percent gap in the first half of November 2020, the iSeeCar study found.
“The used car market is extremely hot at the moment due to the ongoing chip shortage,” Katrin Zimmermann, a managing director at TLGG Consulting who specializes in the automobile industry, told Observer. “At the same time, EV adoption continues to improve…Consumer demand for personal vehicles climbed throughout the pandemic, often bolstered by trends in capital liquidity. When taken together, these dynamics create a perfect storm for the increasing value of used Model 3s.”