If you have been searching for a new or used vehicle, then you know that the market is red hot. Prices are higher than ever and consumers can’t seem to get their hands on a car that meets both their needs and budget. With stalled production of new vehicles and material shortages, many consumers are turning to the used car market as a remedy. However, recent prices of used vehicles have left many consumers with sticker shocks.
According to recent data, the price for a used vehicle jumped roughly 44% between December 2019 and December 2021. Just two years ago, the median price for a used vehicle was around $17,000. Today, consumers are looking at a median price of over $25,000.
But what exactly is causing this push in higher prices, and when can consumers expect things to cool off? Here are some key factors to consider as you embark on your car buying journey.
What’s Causing the Demand for Used Cars?
Consumers who are looking for great savings on a dependable car are typically pushed into the market for pre-owned vehicles. But today, the high price of used vehicles has left those consumers scratching their heads. There seem to be more consumers than ever looking for a used vehicle, but the supply isn’t meeting the demand.
There are several factors fueling the used car market right now. Many of these factors trace back to the pandemic and the domino effect that followed. In order to understand when the best time to buy a used vehicle is, it’s important to first understand the factors that have created the market we’re seeing today. COVID, A halt in production of new vehicles, and supply chain issues have all played a major role.
Covid Fuels Pre-Owned Vehicle Purchases
The pandemic has played a major role in today’s frenzied pre-owned vehicle market. At the onset of the pandemic, those living in metropolitan areas began to look for transportation in order to move their life from the city to the suburbs. For many of these residents, the answer was shopping for a pre-owned vehicle.
Lockdowns Halt New Vehicle Production
Global lockdowns also impacted the used car market. As a result of these sudden global lockdowns, factories halted the production of new vehicles, further pushing consumers who were shopping for new vehicles into the used vehicle marketplace.
The sudden global shortage of microchips —a necessary component of new and used vehicles— also halted the production of new vehicles.
Supply Chain Issues Wreck Having on Production and Delivery
The sudden halt of production also meant a backlog in the supply chain. Once the supply chain began to get up and running, the unexpected but severe labor shortage began to factor into the situation.
The labor shortage spanned nearly all Industries in the global market. Without workers to make the necessary components of a vehicle, and then packaged and load those products onto cargo ships, the world saw an abundance of shipment delays due to cargo ships stalling in ports across the globe. As companies work to fill in those labor shortages, it will take some time to get the wheels of the supply chain turning again.
Short Supply Means Higher Prices
Simply put, the surge in the price of used vehicles in today’s market is attributed to good old supply and demand economics. As the demand for used vehicles continued to rise during the pandemic, so too did the prices. In the latest data, the Bureau of Transportation Statistics highlights this uptick in used car sales and slump in new vehicle sales over the past couple of years.
Largely due to the pandemic, consumers who would have otherwise been shopping for new vehicles were now shopping for used ones. Naturally, the increased demand has caused the price of used vehicles to reach unprecedented rates. This price hike can be seen across the board with both dealers and private owners selling their used vehicles at higher price points.
Will the Used Car Market Cool Off in 2023?
While the effects of the pandemic have caused those in the market for used vehicles to make some tough, and expensive decisions, analysts contend that there may be relief in sight. The automotive market, especially the used market will likely begin to cool down in late 2022 and 2023.
While the pandemic is not yet over, the world has adapted its approach in order to keep life moving. As The kinks in the supply chain continue to get sorted out, and the gaps in the labor shortage continue to get filled, consumers can expect an eventual return to normalcy in the automotive market.
Will Car Prices Drop in 2023?
Over the next year, consumers can slowly expect to see more new vehicles on the dealership lots. By infusing new production into the market, consumers in the used car space will hopefully begin to lighten up as they move back into shopping for new vehicles.
As the car market continues to cool off, prices will eventually go back down too. While many analysts believe that the markets will begin to cool off as early as late 2022, it’s more likely that 2023 will be a better year for those looking to purchase a used vehicle.
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