We’re running into the same question over and over again:
Why do prices keep going up? How can used cars be selling at prices ‘higher than new’?
#1 All new cars – not just EVs – are now selling above their MSRP prices
Let’s first be clear on what new cars cost, and no, it’s not the MSRP.
The “MSRP” means the Manufacturer’s Suggested Retail Price. This is the price the manufacturer puts on their website as the suggested price that new car dealerships charge for a car. A new car dealership can choose to sell the car for a price above, or below, the MSRP.
In January 2022, 82.2% of all new-vehicle purchases were above the manufacturer’s suggested retail price, according to researchers at Edmunds, the auto-shopping and advice site. That compares with 2.8% a year ago and 0.3% in early 2020.
So… you can’t actually buy a new car for the MSRP right now. The price you see on the manufacturer’s website isn’t what you’ll get when you go to a dealership. If you go to a dealership you’ll find out what the real price of a new car is today.
#2 Increased Demand for EVs
You’ve probably read about most of the major factors driving demand of EVs in the news, but they’re worth restating:
- Gas prices are high (thanks Russia!)
- Public sentiment is changing towards curbing greenhouse gas emissions
- There is newer & nicer technology in EVs
- Governments are still offering tax rebates
- There are an increase range of EV options coming online
- There is general agreement that gas vehicles will depreciate faster than EVs
#3 New cars have wait times of up to 2 years
Demand for EVs has now outpaced supply, and this scenario will continue for years. If you place an order on a new EV, you could wait as long as 2 years. In the meantime, while waiting for a new EV, you will pay the higher costs of gas and maintenance and risk depreciation of the gas car over time.
#4 Supply side challenges
- The microchip shortage affecting all car manufacturing not just EVs
- Material prices are up (Steel is up 100%, Aluminum 70% & Copper 33%)
- Longer term concerns over availability of battery materials (nickel, cobalt etc)
- Shipping and import delays
All of this has contributed to the long delays for new EVs.
In conclusion, here’s what we think:
- This is a bad time to buy a new car, but it’s also a fantastic time to sell your used car. You’ll get a better price today selling your gas car than any time in the future, partly because people won’t want gas cars in future.
- If you’re switching from gas to electric, the savings in gas and maintenance will make up for the difference in price. In most cases you’ll either save money or break even.
- The only manufacturer that has accurate new car prices on their website is Tesla. Most dealerships are selling above the MSRP listed on the manufacturer’s website.
- We expect manufactures to increase the MSRPs in future due to material prices.
- Buying a gas car today makes no financial sense at all. No one will want them in a few years and they’ll likely experience rapid depreciation.
Our advice is simple: If you’re driving a gas car, make the switch to electric now.
- Determine what your needs are (range, size, etc)
- Put a deposit down on a new car (optional – you’ll get in line)
- Buy used (they’re still the best bang for buck at the moment)
When your new car arrives, you can sell the used EV back to us or anyone else. EVs will continue to be in demand and will retain their value for years to come.