The prices of used cars are climbing to record levels, with an average price of $29,011 during November, as the production of new vehicles is slowing due to the shortage of chips, and inventory of used cars is reducing in the dealerships all over the country.
A used vehicle within the United States costs approximately 39 percent more than it cost a year ago, and according to specific estimates, it’s the first time in history that half of households in the United States are in a place where they aren’t able to afford the purchase of a vehicle. The prices have risen rapidly, threatening to drive away many potential customers from purchasing.
In the past, the average person could claim a brand-new car with a monthly cost of $ 500 or more. The equivalent amount is now the minimum to purchase a used vehicle. Alongside the rising cost of everyday goods, including food and gas, the 39-year-high inflation rate has made it virtually impossible for the typical American to afford a car.
A few months ago, the woman visited Jeff Schrier’s used car dealership in Omaha, Nebraska. She was working on a tight budget; she explained she desperately needed an automobile to get to work.
The woman was shown three vehicles priced to her budget of about $7,500. Schrier claimed that the woman was shocked.
“That’s what I get for $7,500?” He recalled her saying. The vehicles were much older or had older or more mileage over them than what she imagined to find a replacement for a car that was destroyed in the crash.
The woman finally decided to purchase the 2013. Toyota Scion with a whopping 160,000 miles. Schrier doesn’t believe he earned any money from the sale. “We just helped her out,” Schrier said.
The availability of new cars is minimal, with less than 1 million cars available in dealerships across the country. The average number before the outbreak was about 3 million. If the supply does not increase to similar to pre-pandemic levels, the prices will remain expensive.
As new vehicles meet the market demands, used cars will follow, and prices will fall when buyers trade their vehicles for more recent models.
In the wake of the lockdowns caused by pandemics that impacted the economy, people stayed in their homes, traveled less, and relied more on laptops and smartphones. Automobile manufacturers stopped production due to lower demand and also adhered to government shutdowns to prevent the spread of disease.
Chip makers changed their emphasis away from automobiles and towards consumer electronics. While the loosening of restrictions and sudden economic growth rekindled auto factories, they would not acquire enough chips, which led to the cessation of production, a shortfall in supply, and high costs.
Large buyers of new cars, such as car rental firms, could not replenish their inventory, and the suppliers of used vehicles dwindled, resulting in fewer cars and higher costs.
The cost of a used car is 63 percent less than that of a brand-new vehicle, which is an increase of nine percentage points before the pandemic.
“I’ve never seen anything remotely close to this–it’s craziness,” Schrier added, who has sold autos for the past 35 years. “It’s quite frustrating for so many people right now.”
Schrier must inform people with lower incomes that he has a small inventory of used cars to offer them. “What used to be a $5,000 car,” Schrier explained, “is now $8,000. The $8,000 that was once a norm was now worth $11,000 to $12,000.”
According to market analyst Jim Bianco, the value of used cars is rising faster than bitcoins and other stock assets.
“If you want to know what the best investment you probably had in 2021, it’s that car sitting in your driveway or in that garage,” Bianco spoke to CNBC the following day. “It is appreciating faster than the stock market and lately faster than some cryptocurrencies.”
