Photo: What Car? Via YouTube
There’s no debating. Most of the issues affecting the automotive industry today, including the strenuous shift to electric vehicles, started with the global pandemic. The domino effect has trickled into the used car market, leading to a feedback loop between used and brand-new car prices.
At the beginning of the year, the U.S. government had high hopes the sky-high used car prices in the territory would return to normalcy. After all, Car Sales 101 states that all vehicles depreciate once a newer model is out– not counting classic cars and collectibles.
Here’s the truth. When the global pandemic hit. Most businesses, including vehicle production plants, came to a standstill to help curb the spread of Covid-19. That was the beginning of supply chain issues, chip shortages, and, ultimately, the slow adoption of electric vehicles globally for the past three years.
What does this mean for the used car market? With a shortage of new cars, the demand shifted to used cars. This caused prices in this segment to soar.
Since the onset of the global pandemic, used cars posted the highest increase, up to 45% in 2020, ending in June 2021. It subsequently took an 8% dip in the most recent reading in December 2022.
A report by JP Morgan in January on ‘Inflation and the Auto Industry’ discovered that the demand in the used car market fueled by rising prices of new cars has led to prices of ‘beater’ cars averaging at about 30% above pre-pandemic levels.
While there’s been a notable decline, used car prices haven’t dropped to normalcy. Inventories are still low, thanks to production disruptions. That’s not all. More and more American consumers are buying out their leases to avoid steep automobile prices and interest rates.
According to industry experts, part of the reason why there was a decline was the sky-high prices were not sustainable and were in part pushed by consumers in the used-car market overpaying for the limited supply of second-hand cars.
The Federal Reserve, trying to curb the soaring vehicle prices for the past year, raised its short-term benchmark range to 4.75% from 4.50% (from nearly zero) to tackle the highest inflation the United States has witnessed in four decades.
But here’s the twist. The recent consumer price index shows that used cars in America fell in February by about 2.8% compared to the previous month (13.6% in the last year). It doesn’t capture the wholesale price dealers paid in February – which was higher.
Pat Ryan, the CEO of the car shopping app CoPilot told USA TODAY the lower-priced vehicles consumers bought in February could have been purchased by car dealers late last year or in January when the market was experiencing a decline. As a result, used car prices are expected to rise steadily moving forward.
Is the rise inevitable? Well, the only solution is an increase in new vehicle production. That, in turn, will boost the number of used cars in the future, dropping the demand.
Here’s the truth. When the global pandemic hit. Most businesses, including vehicle production plants, came to a standstill to help curb the spread of Covid-19. That was the beginning of supply chain issues, chip shortages, and, ultimately, the slow adoption of electric vehicles globally for the past three years.
What does this mean for the used car market? With a shortage of new cars, the demand shifted to used cars. This caused prices in this segment to soar.
Since the onset of the global pandemic, used cars posted the highest increase, up to 45% in 2020, ending in June 2021. It subsequently took an 8% dip in the most recent reading in December 2022.
A report by JP Morgan in January on ‘Inflation and the Auto Industry’ discovered that the demand in the used car market fueled by rising prices of new cars has led to prices of ‘beater’ cars averaging at about 30% above pre-pandemic levels.
While there’s been a notable decline, used car prices haven’t dropped to normalcy. Inventories are still low, thanks to production disruptions. That’s not all. More and more American consumers are buying out their leases to avoid steep automobile prices and interest rates.
According to industry experts, part of the reason why there was a decline was the sky-high prices were not sustainable and were in part pushed by consumers in the used-car market overpaying for the limited supply of second-hand cars.
The Federal Reserve, trying to curb the soaring vehicle prices for the past year, raised its short-term benchmark range to 4.75% from 4.50% (from nearly zero) to tackle the highest inflation the United States has witnessed in four decades.
But here’s the twist. The recent consumer price index shows that used cars in America fell in February by about 2.8% compared to the previous month (13.6% in the last year). It doesn’t capture the wholesale price dealers paid in February – which was higher.
Pat Ryan, the CEO of the car shopping app CoPilot told USA TODAY the lower-priced vehicles consumers bought in February could have been purchased by car dealers late last year or in January when the market was experiencing a decline. As a result, used car prices are expected to rise steadily moving forward.
Is the rise inevitable? Well, the only solution is an increase in new vehicle production. That, in turn, will boost the number of used cars in the future, dropping the demand.
Google News