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Used car sales are on the rise, and this happens even when compared to pre-pandemic times. The reason for their popularity is the global chip shortage, which has reduced inventories for numerous dealers and caused delays in deliveries. Customers who wanted a car as soon as possible turned to second-hand models.
With limited supply meets high demand, prices go up, which means that some owners of vehicles up to three years old were called by their dealers and asked if they were interested in selling those cars back to their dealers. The resulting stock of used cars in dealer lots is then sold with a mark-up, and there are customers interested in buying those used cars since they cannot buy new vehicles in their preferred market segment.
Industry analysts fear that the situation could lead to higher inflation figures in some countries, while others warn that the soar in used car prices is not going to last. While the global chip shortage could outlast the pandemic, the market will work to adjust the difference between supply and demand. Once that happens, the rise in used car prices is expected to stop. Analysts have not managed to estimate when that will take place and how will the market handle the situation.
Used car wholesaler Manheim told Fox that the average price paid for a vehicle in July dropped by 2.6 percent in July, and there was a 1.3 percent drop in June, but the average transaction price over five million sales was $19,482, which is 23.6-percent more than what it was in the same period of last year. The prices referred by the wholesaler refer to business-to-business sales, which will then reflect the retail market in six to eight weeks.
So, should you expect to see lower prices at dealership used car lots in late September? Not necessarily, as demand could remain high, and any business owner chases a return on their investment, which refers to the purchase of used cars for retail sales down the line. Smaller businesses in the field are more vulnerable in this area, as they need to keep selling cars to keep their bills paid, while larger players can shuffle inventory and resources to ride out the shortage.
Things are not different in the UK, as the Society of Motor Manufacturers and Traders (SMMT) reported a 108.6 percent year-on-year increase in the used car market in the second quarter of 2021. When compared to the pre-pandemic level, the sales of used cars are up by 6.6 percent. Customers sought gas-engined vehicles, but dealers noted a rise in demand for electric vehicles.
Unlike the U.S., only 12.7 percent of used cars sold in the UK were made in the last three years, which is the lowest on record. American customers are more willing to buy used newer-model cars, while their counterparts across the pond were more interested in older and more affordable models. Regardless of where they do business, dealers have benefitted from the trend overall, but the good news came for those who already had user car lots.
Fortunately for dealers, the global recession made them come up with alternative revenue streams years ago, and those who adapted to that crisis turned out to be ready for the dwindling stock of used cars, along with the delayed delivery of new models. Not all dealers are going to walk out of this crisis when it will be over, but those who have adapted their businesses might be more prepared for survival in the long run.
Taking all that into consideration, should you sell your car or hold onto it for longer? The correct answer is that it depends on how much you can get for your vehicle, how long you must wait for your next car, if you can find your next car on the market as soon as you sell your current car, and if it suits you financially and emotionally.
Selling your pride and joy just to have money in the bank may be a decision that you will regret as the years go by, but not all cars are collectible. The people who own several cars are more advantaged by the situation, as they can sell a car from their personal "fleet" and still have a means of transportation to use during the pandemic without worrying about the used car market prices or dealer markups for either new or used vehicles.
Our advice is to consider your options before you buy or sell a vehicle. Your negotiation leverage drops once you no longer have enough money to buy whatever car you are interested in, as well as if you sell a car that is worth more than normal due to a shortage in supply.
Industry analysts fear that the situation could lead to higher inflation figures in some countries, while others warn that the soar in used car prices is not going to last. While the global chip shortage could outlast the pandemic, the market will work to adjust the difference between supply and demand. Once that happens, the rise in used car prices is expected to stop. Analysts have not managed to estimate when that will take place and how will the market handle the situation.
Used car wholesaler Manheim told Fox that the average price paid for a vehicle in July dropped by 2.6 percent in July, and there was a 1.3 percent drop in June, but the average transaction price over five million sales was $19,482, which is 23.6-percent more than what it was in the same period of last year. The prices referred by the wholesaler refer to business-to-business sales, which will then reflect the retail market in six to eight weeks.
So, should you expect to see lower prices at dealership used car lots in late September? Not necessarily, as demand could remain high, and any business owner chases a return on their investment, which refers to the purchase of used cars for retail sales down the line. Smaller businesses in the field are more vulnerable in this area, as they need to keep selling cars to keep their bills paid, while larger players can shuffle inventory and resources to ride out the shortage.
Things are not different in the UK, as the Society of Motor Manufacturers and Traders (SMMT) reported a 108.6 percent year-on-year increase in the used car market in the second quarter of 2021. When compared to the pre-pandemic level, the sales of used cars are up by 6.6 percent. Customers sought gas-engined vehicles, but dealers noted a rise in demand for electric vehicles.
Unlike the U.S., only 12.7 percent of used cars sold in the UK were made in the last three years, which is the lowest on record. American customers are more willing to buy used newer-model cars, while their counterparts across the pond were more interested in older and more affordable models. Regardless of where they do business, dealers have benefitted from the trend overall, but the good news came for those who already had user car lots.
Fortunately for dealers, the global recession made them come up with alternative revenue streams years ago, and those who adapted to that crisis turned out to be ready for the dwindling stock of used cars, along with the delayed delivery of new models. Not all dealers are going to walk out of this crisis when it will be over, but those who have adapted their businesses might be more prepared for survival in the long run.
Taking all that into consideration, should you sell your car or hold onto it for longer? The correct answer is that it depends on how much you can get for your vehicle, how long you must wait for your next car, if you can find your next car on the market as soon as you sell your current car, and if it suits you financially and emotionally.
Selling your pride and joy just to have money in the bank may be a decision that you will regret as the years go by, but not all cars are collectible. The people who own several cars are more advantaged by the situation, as they can sell a car from their personal "fleet" and still have a means of transportation to use during the pandemic without worrying about the used car market prices or dealer markups for either new or used vehicles.
Our advice is to consider your options before you buy or sell a vehicle. Your negotiation leverage drops once you no longer have enough money to buy whatever car you are interested in, as well as if you sell a car that is worth more than normal due to a shortage in supply.
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