Used or certified pre-owned cars have always been a great way to get a sweet, budget-friendly deal on a vehicle in basically new condition. These days, those deals seem to be becoming few and far between. Keep reading to find out why used cars are suddenly becoming more expensive to consumers and more valuable to dealerships:
The market for secondhand cars is on fire. You’ve probably seen local dealership commercials offering top dollar for trade-ins so if you’re looking to sell your vehicle, no matter the year, make, model, and condition, now is the time! According to JPMorgan, used vehicles went for a whopping 40% more in June of 2021 than they did in February of 2020. But why? Economics.
Just like the housing market, the demand for used cars outweighs the supply and inventory dealerships have on hand. But what about the new cars, you ask? There is currently a shortage of microchips, necessary for all electric components of everything from phones to vehicles– thus drastically slowing, in some cases stopping, the production of new and future vehicles. This has caused some dealerships to even drastically mark up the prices of new vehicles and fewer dealer incentives. Those who are no longer looking to purchase new, have now become used car buyers, chipping away at the used-car inventories in all regions of the United States.
This has even begun to affect the car rental business! Typically opting to purchase new cars, these rental car companies are purchasing used vehicles, spending almost the same amount that they would for a new version of that same vehicle 2 years ago.
Despite the increased value of used vehicles, many people are choosing to hold on to their aging vehicle just a little bit longer instead of trading in for newer models, the fear of astronomical prices for a newer car holding them back. In a similar scenario, regular and routine car leasers are also opting to buy out their leases instead of getting into a new lease. These 2 factors are some of the largest sources to a dealership’s used car inventory, further cutting it down and surging prices.
So when will it end? Well, the good news is used vehicle prices peaked in May of 2021 and have been steadily declining since then. The excessive buying frenzy is expected to calm down this fall! Bad news? Don’t expect to see these used car prices go back to what they used to be, there’s still a microchip shortage after all. Experts like IBM President, Jim Whitehurst, say the microchip supply isn’t expected to recover until 2022, maybe 2023, so the new car inventory is expected to continue to struggle until then. Won’t be an overnight fix by any means.
Want to understand more about the current used car market? Reach out to our team at Carlisle Buick GMC.
Photo courtesy of Buick
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