As we previously wrote about on the blog, the availability of all forms of transportation has become more limited during the pandemic—cars, bikes, even scooters. The latest category to feel the squeeze is used car sales.
Anecdotal stories abound of consumers looking far and wide for used cars, and the difficulty in snaring some of the limited stock. Dealers are chasing down former customers to offer soaring trade in values for their used cars. The numbers back up this experience.
Major news organizations are documenting the sudden increases. As Slate reported, the cost of used vehicles shot up 10 percent just in April, “the largest one-month increase in the category since the government began tracking the Consumer Price Index in 1953.” CNN described the prices as “soaring”, citing reports from Edmunds that “lightly used” vehicles are selling for 75-80+ percent of their original list, rather than the 60-70% typical for those vehicles.
The used car boom has also thinned inventory at used car dealerships. One dealer quoted by the Los Angeles Times described his inventory as “decimated.” Seeing the half-empty lots around town—usually filled with used car deals—confirms the limited supply. This, in turn, increases the amounts that the dealers are paying to consumers for their vehicles. Car and Driver even advised buyers to look for deals over 100,000 miles—the vehicles that used to be the last pick for many consumers.
The reasons for this shortage are many—rental car companies replacing their depleted stocks after selling off vehicles last year, supply challenges impacting new car manufacturing, and economic uncertainty pushing many buyers towards used cars. Some even cite a decreased flow of repossessions as contributing to the issue.
It is unclear when this will end, but with manufacturers projecting continued supply constraints into the Fall, this trend is likely going to stick for the foreseeable future.