The used car market has been especially problematic for buyers since the start of the coronavirus (COVID-19) pandemic. Used vehicle prices have consistently increased since early 2020, with some options like the 2021 Chevy Corvette currently surpassing their MSRP when they were new. However, one of the indicators that the situation may be coming to a head is CarMax’s recent $23,000 price tag on a 12-year-old Ford Ranger.
Reasons for the current prices on CarMax and in the used car market
According to the Los Angeles Times, the supply of used cars was short even in early 2021, and the situation has only gotten worse with time. Of course, car prices will go up if the supply is shorter than the demand. As for why the supply is short, there are a couple of reasons.
One is that automakers can’t manufacture used cars, and you only have the models currently owned by the public to work with. Add that to the fact that the rental car industry used to be one of the biggest sources of used cars. However, that changed during the early stages of the pandemic when travel was limited. Consequently, instead of rental car companies selling their 12-month old vehicles and buying new ones, they initially sold their cars without purchasing replacements.
A few months later, these same rental car companies went back to the used market to buy back some models for their businesses. This, of course, reduced the number of used cars on offer. Also, since they hadn’t bought new cars, it meant that 12-18 months later, they wouldn’t be adding to the supply of used vehicles on the market.
Next, banks were more lenient with their repossession practices throughout the coronavirus pandemic, allowing consumers to delay some of their vehicle payments. This is another source of used cars that was cut off.
Regarding demand, people were apprehensive about buying cars in the initial stages of the pandemic. However, with the extra money they saved up thanks to lockdowns, fewer spending opportunities, and expanded government benefits, they were more willing to spend on vehicles.
Unfortunately, this coincided with fewer new cars on the market, meaning more buyers had to turn their attention to used cars. The result is that used car prices shot up, and one of CarMax’s recent listings embodies how bad the situation has gotten.
The CarMax 12-year-old $23,000 Ford Ranger
CarMax is asking for roughly $23,000 for a 2010 Ford Ranger featuring a 2.3L 4-cylinder engine. It’s also two-wheel drive and, to its credit, seems well maintained. You can see that in the pictures of the dashboard, cloth seats, and bed, not to mention the air conditioning looks to be in good working order as well.
Despite the almost pristine condition, there’s no hiding the truck’s age, and it’s easy to see the price tag looks severely out of place next to the Ranger. For context, the 2022 Ford Ranger has a $25,285 starting price, just $2,285 more than the asking price for CarMax’s 2010 model.
The 2022 version will, of course, have a newer engine, a better safety rating, better performance, and a host of other modern features. Additionally, you can get the $19,995 2022 Ford Maverick as an alternative, driving home just how absurd the CarMax listing is.
Admittedly, there is a shortage of new vehicles, making buying a new pickup truck more complicated. That said, selling a 12-year-old Ford Ranger pickup truck for $23,000 is still ludicrous.
New cars and how changes in the auto industry have affected pricing
Along with CarMax, the used car market has been subject to the most significant changes, but the new car market isn’t much better, with prices rising as well. Kelley Blue Book calculated the average cost of a new vehicle in December 2021 to be $47,077. Conversely, according to CNBC, the average price for cars in the U.S. in 2019 was $36,718.
The new car market is also experiencing insufficient supply due to the chip shortage and supply chain problems, which are directly related to the pandemic. Nonetheless, Car and Driver notes that manufacturers and car dealers are also taking advantage of the situation.
Automakers seem to be prioritizing the manufacturing of higher profit models and trim levels over more affordable cars with their limited materials. Additionally, there’s no need to include buying incentives such as lower prices since the demand is higher than the supply. For the same reason, dealers have been able to set car prices that are significantly higher than the MSRP and still sell cars.