I've told this story before, but I like telling it, so here goes.

I once went shopping for a Mustang Cobra, back when they were cool and I was young and into those kinds of cars. The local Ford dealer had their new car lot next door to the used lot, literally separated only by a driveway.

I went to look at the 2004 Cobras they had a half dozen of, and they were marked down (IIRC) $8000 off MSRP. I thought "Cool, the 04 is no different from the 03, so I wonder what I can get one of those on the used lot for." And walked over to look. The 03s were priced higher than the marked-down price on the 04s a couple hundred feet away. At the same dealer.

I brought it up with the used car manager, incredulous at what he was asking for the used ones. His response was "Yeah, go buy one of the new ones, these will sell just fine." I asked why and he said there is a whole class of buyer that won't even look at new cars. That the new car market and the used car markets are not in fact sharing the same space, even if it seems like it would make sense for people to cross-shop. So he priced his used cars at whatever the market would bear, which turned out to be higher than Ford would unload the new ones for.

Does this happen often? Perhaps not. But over the years I've bought new cars on several occasions where the used equivalent was going to save me a whopping $3-4K for a car that was two or three years older and with some miles. It did not make any financial sense whatsoever to buy the used one for such a small discount.

I was literally in this situation this year. My parents needed an upgrade, and as I was researching it, the 2 year old used cars were just 1-2k EUR cheaper than the same model new with a slight discount. Of course we got the new one, if only for having the full warranty period.

> Instead, they’ll get something a couple of years old and save maybe a few thousand dollars on a $40,000 vehicle.

A used 2 year old Ioniq 5 is selling for about $15-20K less than MSRP.

Some years ago, a friend bought a 2 year old Forester - for a full $10K less than MSRP.

It's not a "few thousand dollars".

(Oh, and personally, if you buy a 2 year old car - you're paying way too much. 6-8 year old cars are a good value).

>> people like those in-laws probably aren’t buying EVs.

> A used 2 year old Ioniq 5 is selling for about $15-20K less than MSRP...It's not a "few thousand dollars".

The Ioniq 5 is an electric vehicle. The whole point of this article is that EVs depreciate significantly faster than Internal Combustion Engine vehicles. A brand new ICE vehicle depreciates quickly but not to the point of losing 50% in 2 years.

>6-8 year old cars are a good value

Agree.

I did point out another ICE car that lost $10K.

In general, particularly for higher priced cars, how many do you know that don't lose about $10K in value after 2-3 years?

>It's not a "few thousand dollars".

It is if you're buying a 4Runner or top of the line diesel pickup or some other meme car that people buy because of how great the internet says it is.

But in the general case I agree with you.

There was a big change in the used market after Covid, that may not have fully worked itself out yet.

Your in-laws are correct and your friend is wrong. Historically the largest depreciation hit on new cars is in the first few years. Getting a low mileage used car that's a few years old is typically the sweet spot for value. You have to price out new and used to understand where the best deals are but generally it's true.

That did go strange for a while during COVID but has mostly become true again.