We’re paying more for, well…everything. But the pricetags on the windshields of used cars have gone insane. If you’ve shopped for that black 2017 Ford F-150 with an extended bed, or a well-maintained, economical late-model Honda, Toyota, Nissan, Kia, et al — then you understand. Consider this: Used-vehicle prices average more than a third higher now than in January 2021. A full 33% higher in a single year.
That means, for example, that an average used car normally selling for $20,000 is now selling for $26,600. It should be no surprise that in the last half-century, the current 33% increase is just shy of the record one-year increase for used car prices, reported in 1975.
Today, the Average Used Car Price Is More Than $27,500. (that’s not a typo)
Used car prices have risen — and continue to rise — as the international microprocessor shortage and supply chain delays drag on — as a result, fewer car owners traded in their old rides due to limited new car availability. Used car values have risen as a result of the combined wallop of reduced availability and higher demand. The fact is, the true impact of skyrocketing used car prices is being felt cross the economy. Turns out, used car sales are an important component — and indicator.
The Consumer Price Index, Americas key measure of inflation, reports that “The astronomical prices of used and new cars have seen the CPI jump to a 13-year high by May of 2021”. And that increase was — and continues to be — solely due to the prices of used cars.
The root cause…
The microprocessor shortage and supply chain issues have resulted in exceptional price rises. Ironically, certain slightly used cars are now more costly than new vehicles. While used car prices are projected to remain high for the near future, we are expecting to see if they will continue to rise or begin to return to pre-microchip scarcity levels.
Good News for the Long-Term. The Short Term…not so much.
First, a ray of hope. Inventory is slowly starting to increase. Used car dealers in the U.S. had 2.31 million vehicles in stock at the end of November, up from 2.25 million at the end of October. Black Book found that when there are used vehicles available, they’re often newer models. The inventory of used vehicles that are up to two years old is growing faster than vehicles that are between two and eight years old.
Black Book also analyzed the prices of approximately two million vehicles listed for sale on U.S. dealer lots, specifically used vehicles that are between two and six years old. Black Book reported that the price index for them has been mostly steadily climbing since the spring, with a bit of a peak in the late summer. Since then, prices have steadily risen.