Used Car Pricing: The Insanity of Used Car Prices

Most people know that to buy a new car, you have to pay the full sticker price. That’s because most people know that new cars cost tens of thousands of dollars to make. As such, it seems insane for used car prices to be just hundreds of dollars less than their value. But this is a misconception and there is actually a very logical reason why used cars in miami prices are so low. The overwhelming answer is that used car prices are low because used cars are relatively cheap to make.

Selling a car for less than its value

Let’s start with something much more tangible. You buy a used car for $2,500, but you know that the real value of the car is worth five times that. Why? Because you know how much it costs to make the various parts that go into a new car. You converted it from quarters to dimes earlier in this analogy, because cars are not made with material costs like furniture is. Why would anyone make a used car for so much less than its value?

Selling a car for less than it’s worth

By the same logic, if you know how much a used car costs to make but you don’t know how much it’s worth, then you’re going to sell it for less than its value. Therefore, the value of used cars is equal to the cost of making them exactly. Looking for more information? You can find out more here.

You can’t make new cars out of used parts

Here’s why very few people would make a used car for less than its value: it’s hard to make a whole new car out of the parts that were used in an old car. For example, here’s how you might go about making a new 2003 C3 Corvette: you take every part from ten individual Vettes, then fit them into one big pile. That’s not easy. Furthermore, if you have to pay for new parts in the process and you don’t recoup your expenses, then people will only do it if the value of the end product is greater than the cost of making it.

The exception that proves the rule

The average used car sells for about six months before it gets scrapped for parts. Tow trucks and junk yards pay more money per pound than a scrapyard: 8 cents per pound at a junkyard vs. 10 cents per pound at a scrapyard. Thus, when a car’s value is worth more than eight cents per pound, people will take it to the junkyard. When its value is less than eight cents per pound, then people will keep it and sell it for parts. This can only happen if used cars are just as cheap to make as new cars. Otherwise, no one would even bother selling something for parts that could sell for scrap metal money.