The COVID-19 pandemic has had an increasing and unexpected impact on the used car industry. In fact, the Consumer Price Index found that used car prices have risen 21 percent since April 2020 and increased 10 percent in April 2021 alone. With this, the demand for used cars has grown as well. So, what does this mean, and why has this happened? These are two things we are going to discuss today.
The Connection Between New And Used Cars Markets
Though the market for used cars is considerably larger than that of new vehicles, both markets operate in tandem. The used car market doesn’t exist without inventory from other places such as trade-ins, turn-ins of leased cars, and rental car companies retiring fleets.
However, as the pandemic began to heat up in 2020, elements of the new car supply chain were heavily impacted by lock-downs and a lack of employees. Then there was the semiconductor computer chip shortage that stalled manufacturing processes. These factors left automakers struggling with losses in the billions of dollars and workers facing cuts or layoffs.
The significant hit that the new car market took in sales has also had an impact on the used market supply. The problem is people aren’t ending leases or trading in vehicles as often as they were before the pandemic. In 2008 following the financial crisis, the federal government passed legislation to stimulate car sales with a program known as “Cash for Clunkers. The program allowed people to trade in older model vehicles in return for discounts of $3,500 to $4,500 off the price of a more fuel-efficient, newer vehicle. However, there’s been no such help for automakers this time around. This has left the auto industry trying to recover from shutdowns and catch up with demand, with no governmental assistance.
The sales of large trucks and SUVs have kept the new vehicle market going because folks buying new haven’t been as financially impacted by the pandemic. Yet, used and new car dealers serve a different demographic of buyers and maintain a different stock of fleets. So, while used car demand is up and new car sales have increased, the supply chain disruption has led to fewer new and used car models on hand. State to state auto transport is as busy as it’s ever been with the increase in used cards being sold from different states.
The Turn to Used Vehicles
High-priced SUVs may be more popular now than ever, but the lack of inexpensive, smaller cars has forced lower-income and younger buyers out of the new-vehicle market. Now, the people who can’t afford to purchase a brand new Ford Edge are looking for pre-owned and more affordable options. One such option for these folks is sedans, so many are looking for models in their price range that are reliable and cost less to maintain. The other option is expanding the search area for a used vehicle, even if this means utilizing long-distance car shipping methods.
This increase in demand for used cars and trucks has forced dealerships to run ads and even call on vehicle owners to encourage trade-ins. As more people continue to avoid ride-sharing and public transportation options, the problem isn’t getting any better regardless of these efforts.
What Options Are Left?
For those who currently do not have vehicles, the options are limited. The best thing someone like this can do is check with new car dealers and review options for smaller, more affordable sedans. Though the prices of new cars have risen, the interest rates are historically low, which helps offset the sticker shock. As we mentioned, sometimes it helps to expand the search area, and then if possible simply pay for a car transport company to deliver the vehicle.
Alternatively, those who already own used vehicles are best off keeping what they already own, regardless of how enticing the higher worth is today. Remember that it’s not easy to replace a car in this market. Yet, at the same time, if you own a vehicle you no longer use regularly, it’s a seller’s market, and you can get top-dollar from the right buyer. Just keep in mind that the buyer may be across the country, and the sale may require long-distance car shipping.
The Bottom Line
The market seems to be evening out, but any time there is a supply chain disruption, it takes time to return to normal. So, anyone not in immediate need of a new or used vehicle may be better off waiting it out. Yet, if you currently own a used vehicle you’d like to sell, be sure to market it everywhere, even if this means turning to long-distance car shipping services for delivery. Regardless of if you have to deal with car transport or not, the important thing is that you take advantage of a seller’s market and get top-dollar for your sale.