Why are used cars priced like new cars?

When a used Toyota truck with over 200,000 miles can still sell for its original retail price, something has broken in the car market. "This isn't normal," says car market researcher Ivan Drew. "This is extremely abnormal." For many Americans, transportation is their second-largest expense after housing, and the affordable used car market as we know it is dying. The average used car that is just three years old now costs more than $32,000, and the sticker price tells only part of the story.

Three Reasons Used Cars Are So Expensive

The first reason is what economists call the "price waterfall." Used car prices follow new car prices, so when the cost of new vehicles rises, the cost of used versions of the same make and model rises with them. From 2019 to now, new car prices have risen at an annual rate of 4.3 percent—close to overall inflation. But used car prices have accelerated past that, climbing about 5.5 percent annually. Tariffs on new cars and the materials that make them keep pushing that waterfall upward, even for used cars manufactured before the tariffs took effect.