During these unprecedented times, it seems shocking records are set daily. For the first time in history, the price of used cars has risen above $25,000. The market is not expected to turn around any time soon. Potential car buyers need to act fast and buy with intention. These market conditions could continue until 2023.
Prices are so high it’s surreal
The average price of a used car sky-rocketed in April 2021 to $25,463 according to JD Power. That price is $2,000 higher than the average used car prices in April 2020. The U.S. consumer price index, which is a measure of economic inflation, was brought to a 13-year high by the rise in used car prices alone.
Phil Maguire, the owner of Maguire Family Dealerships in New York, gave a statement to the Wall Street Journal that sums up the situation succinctly, “What is normally a depreciable asset has been appreciating, it’s certainly surreal.” The current used car market highlights the growing gap between prices and average incomes.
If prices continue to rise as predicted, more families will lose access to transportation. Owning a car is a necessity for many families to work, access to health care and other essential activities. A major transportation shortage could have larger societal impacts.
Buyers are urged to act fast if they have to buy
Car ownership is compulsory in some areas. Some buyers may not be able to avoid making a purchase while prices are high. Market experts don’t expect prices to return to normal any time soon. Some factors contributing to the situation will naturally resolve, others are more complex.
COVID-19 supply chain interruptions have affected the availability of everything from rubber to silica making it difficult for automakers to keep up with historical demand. Economists predict that this shortage will last until 2023.
It’s difficult to predict the end of the computer chip shortage as the issue is multifaceted. The COVID-19 pandemic is partially to blame but so are controversial trade tariffs imposed on China by the Trump administration. These tariffs make it difficult for the world’s largest computer chip manufacturers to keep up with global demand.
Good deals can still be found
Record-breaking prices don’t mean that there are no bargains to be found, it just means they are fewer and farther between. Consider shopping with a smaller dealership outside of a major city. Population centers are more directly impacted by market shifts and inflation that rural communities. If you live in the suburbs, shop locally.
Small dealerships offer some of the perks of major showrooms. Limited warranties and service packages are offered in some family-owned lots. On-site mechanics can walk buyers through the repair and maintenance history of vehicles. It’s less likely to speak to a technician at a major dealer.
Person-to-person sales are slightly riskier but can offer some of the biggest savings. An independent inspection from a licensed mechanic can find hidden issues. A VIN search with websites like Carfax can turn up prior accidents and other events.