Used car prices are skyrocketing, making It difficult for buyers
Things are changing for the used car market, the scene is booming which means people who want to sell off their vehicles will be smacking their lips. It is good news even for the people who want to trade in their car in favor of a new one. The economy is reviving after the butchery the COVID-19 pandemic lashed on the industry but that also means there is currently a shortage of new cars.
Hence people who want a mobility option quickly are opting to buy a used Honda Accord, or a used Nissan Altima for the time being. This has led to the demand for the used cars to jump sharply compared to last year, the average cost of a used car has jumped from $21,020 to $23,643 which is about 12.5 percent greater according to the National Automobile Dealers Association (NADA).
This relatively high price of used cars might counterintuitively push a lot of customers towards new cars right now. However, given the situation as stimulus checks and tax refunds are deposited into consumers’ bank accounts while at the same time the businesses are reopening.
Add to that the tighter supply of new cars, people have no other choice but to look at the used car market. Of course, if you are one of those people who are actually trading and selling your vehicles, there will not be a better time. It usually happens that often that used vehicles as the whole market itself goes up in value.
This trend can be linked to the shortage of the supply of new cars globally because of a computer chip shortage and other supply chain delays. Unfortunately, many analysts see this production slowdown to stay for a considerable amount of time. The dearth of semiconductor chip production has crippled the automotive industry more than anyone had expected.
More specifically, the way the new-vehicle production has been cramped is that the models in the lineup which uses more technology, typically the availability of these higher trims of a vehicle which tend to have more features and screens are being severely limited for months at a stretch.
This shortage of chips has already ravaged brands like Ford, General Motors, Honda, Toyota, and several other companies which also had to shut down their factories because of this shortage of supply. And no, this is not the first time this is happening since the pandemic. Right when the pandemic started, all the automakers were forced to temporarily stop the production of most new vehicles due to the lockdown.
Naturally, buyers went to the used car market to get their need for a mobility solution met. This time, however, the situation is the same, but for a different reason. Supplies for even the most famous trucks and cars are beginning to dry up; that could make certain vehicles hard to get by. Although not all automakers are in the same boat.
This can also be an interesting time for the dealerships that sell used cars, as consumer searches for used cars are double what they were a year ago, they can embark on effective marketing strategies. Used cars are disappearing from car lots a bit faster than before, so that would also encourage customers to move quickly and get the car they like.
Though this spike in used car prices seems to go upwards, this spike can also be a double-edged sword. Dealers are also keen on getting as many used cars as possible so that they can capitalize on this trend, which means for the people who are looking to trade in and sell their used cars can also get top dollar for their vehicle. While dealers are usually keener on cars that are under 2 years old, they would also be interested in cars that are in the 3 to 5-year range.
This can be the silver lining in the whole situation, their trade-in will never be worth more than what it is right now. This can in turn put them in a better position if they want to buy a new car than later. So even if the people have recently bought a vehicle and are feeling that little bit of buyer’s remorse, now is the best time to sell and move on to the next one.
There are some dynamics which change with the body styles of the vehicle as well. For example, since the demand for SUVs and trucks has generally surged, that will also bleed its way to the used car market. Also, seeing this, dealers are more likely to negotiate over the price of sedans, which enjoy significantly less popularity over the past few years compared to the SUVs. Not to mention, sedans also tend to be much more fuel-efficient than SUVs that are of similar size.
In the end, it is up to the customer to make the final decision regardless of the prices. But it is unlikely that such a good time will ever come by again where one can get the most deal possible for their trade-in as the global supply chain problems continue to plague automakers.
It is expected to take a considerable amount of time for the market to calm down eventually. It is recommended to do a fair amount of research before making that purchase decision as the amount of money involved now is as much as a new car.
Story by Utsav Arora