Why used cars are selling for new-car prices
New-car price increases drag used cars up with them through the ‘price waterfall’; pandemic production cuts left the car market digesting the shock for years, like a snake swallowing a mouse; and US automakers simply stopped building cheap sedans — the cars you can get for $10,000 to $15,000 went from 5 years old to 9 years old.
The video won't play here. Listen to the audio instead:
The argument · tap a timestamp to hear it
New-car price increases have actually leveled off
A lot of people assume the car market is still in runaway inflation, but the data doesn't say that. From 2019 to now, new-car prices rose 4.3% annualized, while overall CPI rose slightly under 4% annualized over the same period — not a wild gap. In other words, the new-car line has basically returned to the broader market's level. The real problem is the other half of the market: over the same period, used-car prices rose about 5.5% annualized, beating both inflation and new cars. Today a used car just three years old averages over $32,000. So ‘cars are expensive’ is mainly not a new-car problem — it's a used-car problem.
— Ricky Mulvey / Angel CarrerasUsed-car prices follow new cars, and tariffs feed through too
The first mechanism is called the ‘price waterfall’: used-car prices follow new-car prices, and for the same brand and model, when the new-car price goes up or down, the used one moves with it. This isn't new. The key point is that even if a used car was built before a tariff took effect, its price is still affected by the tariff — because the tariff raises the cost of new cars and of the materials that go into them, the whole water level of the waterfall rises, and the used cars downstream get lifted along with it. So hoping that ‘I'm buying an old car, the tariff has nothing to do with me’ doesn't hold up.
— Jeremy RobbPandemic production cuts are a snake swallowing a mouse, not yet digested
The second mechanism is supply. The drop in car production in 2020 means that years later — say, in 2026 — used-car buyers have fewer cars to choose from. Jeremy Robb's metaphor is ‘watching a snake swallow a mouse’: the low-production bottleneck propagates down the timeline, and when supply is thin, prices are generally high. The car market is that snake still slowly digesting the used-car mouse, and its stomach is still unhappy. This mechanism explains why, long after the pandemic, the selection of used cars is still narrow.
— Jeremy RobbAutomakers deliberately killed off cheap sedans
The third mechanism is a business decision, not an act of God. Ivan Drury says the automakers' judgment was ‘nobody wants sedans, so let's build more big SUVs’ — big SUVs selling for $60,000, $70,000, $80,000, even $100,000, while the $20,000-to-$30,000 entry-level sedan was removed from the market entirely. US automakers have all but emptied out the whole category; Ford stopped building ordinary sedans like the Fiesta years ago; the Japanese and Korean brands still have a few, the German brands fewer. The result is that an entire vehicle category has been compressed into a handful of choices, and anyone who wants ‘just a tool to get from A to B’ has to wait in line.
— Ivan DruryA $10,000-to-$15,000 car is now four years older
Stack those three mechanisms together and the cheapest segment of the market has essentially been ‘scrapped’. Ivan Drury looked into this range: in 2019, $10,000 to $15,000 bought you a car about 5 years old; today, the same money buys a car approaching 9 years old with roughly 100,000 miles on it. This isn't just a change in numbers — it creates a personal-finance trap: trying to stay on budget brings on more expenses instead. A 100,000-mile car usually needs more repairs, and the expensive, annoying parts — water pumps, timing belts — will fail, and anyone who can't do the work has to pay someone else to fix it. The money you saved on the purchase price may flow right back out through the repair bill.
— Ivan DruryAuto loan rates have doubled, but inflation data doesn't count them
There's another big cost that the statistical definitions miss: interest. In 2019, a borrower with ‘good but not great’ credit could get a 4.5% auto loan rate; today the same person with the same loan gets close to 9%, roughly double. The key point is that the agencies that record inflation data only count the price of the car, not the monthly interest expense. So the official numbers don't look that bad, but the actual monthly payment burden on car buyers is much heavier. Ivan's advice is that you have to run the numbers yourself now: if you can get a very low APR on a new car, that low rate can completely erase the premise that ‘buying used is the better deal’.
— Ivan DruryUsed EVs are the one corner still on sale
The car market isn't one single thing. Ivan Drury says there's one segment where you can still find a bargain: EVs. He describes EV resale value as ‘atrocious’, because of misconceptions about EVs — how long the battery lasts, how reliable they are. Those misconceptions push used EV prices down, which in turn creates an opportunity for buyers, and he is bullish on this market. He admits the technology really is iterating fast, which makes people feel that ‘buy today and it's obsolete tomorrow’, but for a lot of cars, even once the tech is outdated, it still works fine.
— Ivan DruryIn their own words · checked verbatim
the average new car sells for over, get this, are you ready? $50,000 in the United States
Angel Carreras0:00
You know, this isn't normal. This is extremely abnormal.
Ivan Drury0:00
It means that when the new car price adjusts down or adjusts up, the used car price of that same make model will move along with that.
Jeremy Robb4:13
I call it like watching the snake eat the mouse or whatever. You kind of see it through time.
Jeremy Robb5:17
Entry level sedans, 20, 30 K, completely removed from the market.
Ivan Drury5:17
it makes it very difficult for people to say, look, I want just like A to B transportation. I do not need something fancy.
Ivan Drury6:18
You look at those resale values and on EVs, it is just, it's kind of atrocious.
Ivan Drury8:27
Figures
| Average US new-car price | Over $50,000 | 0:00 |
| Annualized new-car price increase, 2019 to now | 4.3% | 3:08 |
| Annualized overall CPI increase, 2019 to now | Slightly under 4% | 3:08 |
| Annualized used-car price increase, 2019 to now | About 5.5% | 3:08 |
| Average price of a three-year-old used car | Over $32,000 | 4:13 |
| Price range of entry-level sedans | $20,000 to $30,000 | 5:17 |
| Age of car $10,000-$15,000 bought in 2019 | About 5 years | 6:18 |
| Age and mileage of car $10,000-$15,000 buys today | Approaching 9 years old, about 100,000 miles | 6:18 |
| Change in auto loan rate for good-credit borrowers | From 4.5% to close to 9% | 7:22 |
Glossary
- price waterfall
- When new-car prices move, prices for the same model as a used car move in the same direction.
- APR
- The annualized cost of a loan; here, the interest rate on an auto loan.
- MSRP
- The official suggested retail price set by the automaker.
How to listen
Anyone buying or trading in a car, investors watching US consumer and inflation data, and anyone in the auto or used-car finance business.
The show's opening and closing banter and ads, and the closing joke about a lime-green Cybertruck.