22Nov
America’s Used-Car Market Has Officially Lost the Plot
Used cars have always been the refuge of cash-strapped shoppers and budget drivers, and it’s been that way for as long as I can remember. But things are changing—fast. In fact, a new CARFAX report brings a shocking revelation; it now makes better financial sense to buy new if the goal is saving money.
Of course, “money savings” is always the goal for people considering the used-car pool. Now, it appears that buying used no longer fits the definition of paying less, and that’s not because of reliability or true cost-of-ownership factors. I’m saying the reason it no longer makes financial sense to buy used isn’t because you bought a bad car or because you lose more money in the long run.
No—it’s because used cars now cost almost the same as a new one, so no point denying yourself the pleasure of the new-car smell with nylon-wrapped seats and gleaming infotainment screens. Why is this happening? CARFAX blamed a shortage of used cars, caused by “a lingering effect from the [COVID-19] pandemic.”
When "Used" Stops Making Cents
As CARFAX spokesperson Em Nguyen told ABC’s Cincinnati-based WCPO-TV, the common perception of the used car lot as where you find vehicles that are much cheaper than their new counterparts is now obsolete.
Note that popular models, like the Bronco, Corolla Cross, and Civic, from the 2023 model year maintain a defiant pricing of around 10% of their 2025 counterparts, an impressive resilience considering that a 3-year-old car should’ve shed around 40% of its value by now. With just a 10% price difference, what’s the point in buying used, then?
“Even a low-quality new car is $35k,” replied a fellow Y Combinator HN member who goes by the username chasing0entropy. “The price of used cars has skyrocketed. Also, most people have realized that cars made more than a decade ago are of better quality than new cars are arriving today.”
Could this be partly to blame for this unprecedented value retention of used cars? Are buyers increasingly favoring decades-old whips over new models?
“Not enough new cars were being produced at that time,” said Nguyen about the Covid period. “If you fast forward five or six years, certainly, there's not a lot of used cars circulating around the market… It's very rare for that new car value and that used car value to be so close.”
It used to be that practicality trumped pride at the used car lot—the one place where a decent hand-me-down could be had for the price of a new smartphone today. Not anymore. The automobile market isn’t the focus of the latest analytical report from the Bank of America Institute, but the takeaway for me is that the era of reliable under-$3k hand-me-down rides is fading fast.
It’s not that we don’t know this already; studies like this BoA report just have a way of putting things in painful perspective. The report shows nearly three in ten Americans now live paycheck to paycheck. In an economy where the median used-car price still hovers around $25,000, the dream of affordable mobility has pretty much become a financial trap on four wheels. The math just doesn’t work anymore.
The current US population is around 333 million. By BOA’s analysis, approximately 30% of the US population can’t afford a used car. It’s a sad metamorphosis for a market known as a haven for thrift. The market has quietly morphed into a high-risk, high-interest arena. For the millions of Americans who belong in the paycheck-to-paycheck crowd, buying used can paradoxically mean paying more and risking everything.
The New Economics of “Used”
It couldn’t have been more than a decade ago that a used car was the financially savvy choice. With depreciation as your tailwind, you could buy a 3-year-old sedan and automatically skip the steepest drop in value. You’d leave the lot with lower insurance, lower payments, and peace of mind.
Today, that logic has been flipped upside down, and the likes of CARFAX would have us believe the wake of the 2020 pandemic is why the average used price of the 2023 Honda Civic stands at $23,400 versus $25,700 for the 2025 model.
COVID made a lot of millionaires and also sank a lot of millionaires. The pandemic-triggered supply chain disruptions hampered new-car production in 2020 and 2021. Consequently, demand for used cars exploded. Dealers were happy to sell ten-year-old trade-ins at twice their original market value. The problem is that supply never fully recovered—that’s what the analysts say.
They say that’s why the used market has normalized 2018 or 2019 models with stickers that were flat-out absurd before COVID. It’s the quiet reality for paycheck-to-paycheck Americans in 2025: the “cheap” option isn’t cheap anymore. Some people think, under the circumstances, it’s better to buy a used EV.
“You can buy an insanely great BEV for 40% of retail after it's gone off lease after 2-3 years. Everyone is concerned about battery life, but it'll have years to go,” said another Y Combinator HN user who refused to be interviewed. Jillesvangurp seemed to agree it’s better to buy used as long as it’s an EV:
“EV depreciation is nonlinear. You lose a lot of the value in the first year because new EVs get better in ways that ICE cars long stopped improving. They get better ranges, faster charging, better battery longevity, more efficiency, etc. For some older models, you can get nice discounts on them new because of this or there are attractive incentives that somewhat moderate the impact of this effect.”
According to Experian data, the average monthly payment for used vehicles hovered dangerously close to $550 in 2024, translating to a few hundred dollars less than for a brand-new car. While the monthly average was around $525 or $523, it spiked north of $552 in Q2 2024 and even hit $569 in Q2 2023.
Factor in the fact that interest rates have more than doubled since 2021, and you begin to understand how tight the noose is around shoppers with shaky credit scores. They’re faced with double-digit APRs and have to extend loans to seven or even eight years just to make payments manageable.
In other words, the so-called paycheck-to-paycheck Americans who seek refuge in the used-car lot are faced with long-term, high-interest loans on aging vehicles that may not even outlast the loan itself.
Freedom’s Price Tag And The Subprime Slippery Slope
According to BoA’s sobering data, roughly 29% of Americans — including a growing share of middle-income households — confessed to scraping by each month.
Even a seemingly modest car payment would swallow a disproportionate slice of their income. How can a household that brings in $4,000 a month after taxes manage a $550 car payment plus $150 in insurance, $200 in fuel, and $100 in maintenance without maxing at least a quarter of their total take-home pay?
They’re just an unexpected medical emergency (or rent increase or job disruption) away from the sort of financial crisis where the car becomes the first casualty. And the ripple effect from “just” losing the car can be nuclear. You lose the ability to get to work, and if you lose your job, there goes your chances of recovering your finances or your credit.
This slippery slope and precarious cycle hit the paycheck-to-paycheck class hardest because they lack the margin to absorb shocks. The picture isn’t pretty, and it reflects the dark side of American car dependency.
In America, mobility isn’t just a convenience but a financial vulnerability. I wonder, did Henry Ford (God bless his soul) foresee this when he conceived the Model T? Many have been forced into the subprime trap. Subprime auto lending fills the gap left by mainstream financing, as evidenced by the growing number of US auto loans that fall in this category.
As recently as early 2024, approximately 16.7% of US auto loan balances were held by deep subprime and subprime borrowers combined (those with FICO scores below 620), where borrowers face interest rates above 18%, sometimes into the 20s. I can confidently say that you can trace many such loans to buy-here, pay-here dealerships that advertise “No credit? No problem!” while selling cars far above Blue Book value on long-term loans.
They smile to the bank with massive cumulative interest. The customer ends up paying $25k+ on a $15k used sedan, and the contract often comes with remote-disable GPS devices as the cherry on top. The typical prey, as identified in BoA’s findings, are younger workers, lower-income families, and essential employees who rely on cars.
Do they really have a choice?
Swerve the predatory loans and risk a full-on frontal collision with deferred maintenance—skipping tires, brakes, or timing belts because money’s tight. Considering that AAA placed the average annual cost to own and operate a new vehicle at over $12,000, a missed $400–$600 repair can easily snowball into a $3,000 transmission failure.
The market and the economy have shoved the not-rich into an impossible situation, to the extent that you can’t even avoid predatory lenders without being caught in a cycle of breakdowns, losses, and more debt. Unfortunately, the broader used-car ecosystem depends on these stressed buyers.
“The problem as I see it,” said user Lio from Y Combinator HN, “is that for EVs more of the total cost of ownership is in the initial purchase price so they are very expensive to buy new. That means that the used price can also quite high because of that initial purchase price. For a lot of people, it's still a bit of a reach without some kind of finance.
However, with new cars there are all sorts of discounts, grants and 0% interest purchase deals depending on where you live. With used EVs all the loans I've seen have much higher interest rates and so don't end up costing much less than buying new with a 0% deal. Why pay a bank for used when you pay the same to the manufacturer's finance company for new? With the current rate of improvement of EVs I wonder if leasing isn't the best deal currently.”
Yep, it’s what it is.
Delinquencies keep rising, lenders and fintechs keep pushing risky credit, and automakers reap the reward of inflated used prices. It’s entirely a business model built on desperation. Those who benefit from it know only too well that people will stretch to the absolute limit to stay mobile. But for the 29% Americans who live paycheck to paycheck, car ownership experience is just as punishing as it is indispensable.
For them, mobility—still tied to the idea of freedom and dignity—has become more or less a financial entrapment. The whole thing mirrors the broader US economy: heavily leveraged, dependent on cheap credit, and shamefully unequal. The question isn’t whether people will keep buying cars—they have no choice—but whether the system can sustain itself when the very people keeping it running are running on fumes.
Since America has had over a century to eliminate the paycheck-to-paycheck rung from society’s classes, it’s safe to say that making used cars cheap again is the best course to reverse the landmine that the market has become.
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