What’s Going On With Used Cars Lately?

If you’ve browsed used cars at your local dealership, you’ve probably noticed that the prices have seemingly skyrocketed. Of course, that’s if there are actually any used cars available at all.

According to some data, from the U.S. Bureau of Labor Statistics, pre-owned car prices have gone up 39.8% since March 2020. This used car market is certainly problematic for shoppers, and everyone is wondering, “what’s going on with used cars lately?”

A Global Slowdown

When the COVID 19 pandemic started, auto manufacturers around the world came to a halt. The U.S. saw a startling 99% drop in production from February to April 2020. Many auto producers stopped production in fear that the economic hit of the pandemic would reduce demand. The problem, however, was that the demand didn’t slow down.

The pandemic saw an increase in auto demand for a couple of reasons. First, people who relied on public transportation saw owning a vehicle as a way to safely avoid large crowds without losing their freedom to move. Second, many people moved away from large cities into suburban and rural areas where cars are necessary. Third, car scrappage (the continued loss of vehicles due to accidents, life cycles, etc.) didn’t go away. All of these factors combined had a big effect on the used car market.

To make matters worse, even when production ramped up, a shortage of necessary parts and a delay in the global supply line kept new vehicles from coming off of the production lines. The bottom line is that new cars were simply not available to meet the high demand.

Economics 101

Since new cars weren’t available, people looking to buy vehicles turned to used cars. As anyone in an intro business class learns, supply and demand control the market. If there is a large supply of something and no demand, the price will drop. In the case of used cars, there is a finite supply and a massive demand. We also saw a reduction of interest rates that increased people’s buying power. These things together lead to soaring prices.

In some cases, a pre-owned vehicle might actually cost more than a brand new version of the same model. The difference is that the used car is available today, while the new version won’t be around for a while. Dealerships understand the need for used cars in their inventories, which is why they are offering top dollar for trade-ins.

It might be a great time to sell your car to a dealership, but it’s not such a great time to try and buy. Shoppers are finding limited supplies and higher prices across the board.

The Future of Used Cars

There’s no definitive end in sight for the current used car market. Until production catches up to meet the demand for vehicles, pre-owned cars are going to be in demand. Manufacturers are doing everything they can to ramp up production, but it’s going to take a while.

Shoppers who are in need of a car have a few options. The first is to just be willing to pay more. It might be tough, but that’s a surefire way to bring home the vehicle you want. The other option is to consider less popular makes and models. These options are still going to have higher prices, but not as much as the most popular automobiles. Finally, shoppers should consider pre-ordering a new car. It might be a while before the vehicle is actually available, but you can lock in the price on the exact build that you want.

Until then, some drivers might have to forego shopping for new or used cars and just do whatever they can to keep their current rides running.