Used Vehicle Prices Are Still Totally Insane
If you’re in the market for a new vehicle, you’ve likely noticed that some of the models you were interested in aren’t available in your preferred format and happen to be accompanied by sizable dealer markups. Well the used market, formerly a refuge for those seeking a bargain and a shrewd way of dodging the steepest period of deprecation, isn’t doing much better.
According to Black Book, the typical transaction price for used vehicles has gone up by over $500 in less than a month. Pegged at $27,000 in November, the average secondhand car now trades for over $27,500. As we’ve recently covered just how wild secondhand vehicle prices have become in 2021, we’ll keep this one relatively brief. But it must be said that automotive values are starting to seem totally disconnected from anything that could be considered rational as cars now have MSRPs a third higher than they were at the start of 2021.
The laws of supply and demand certainly come into play here. Pandemic restrictions kept everyone home last year, suppressing both demand and production. Rental agencies also felt the pinch, encouraging several companies to offload their inventories. But when demand returned, supply chain issues persisted and automakers failed to manufacture cars anywhere near their normal pace.
Initially, this seemed like a disaster for the entire industry. But it wasn’t long until retailers realized they could buy used cars at a premium and flip them for a tidy profit. The same was true for new vehicles, with MSRPs similarly holding strong due to elevated demand. Meanwhile, rental agencies that had previously dumped their inventories in desperation were now hoarding whatever they could find and charging lubricous rates in the process. The end result was everyone making more money per car and a consumer base that was seemingly willing to endure higher sums. But those prices have continued to swell to a point that’s starting to look less than sustainable.
Car & Driver, which first shared the Black Book data, noted that these prices are the highest on record for used vehicles and cover both franchise and independent dealers — accounting for 95 percent of all available used vehicles for sale. It also stated that other automotive entities had reached different figures while acknowledging that it made little difference in determining the general market trends.
Different analyst companies use different methods to count vehicles, but the trend is similar over at Kelley Blue Book. KBB’s numbers show that the current used-car inventory situation sits at 15 percent lower than it was a year ago, but the good news is that 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 found that the price index for them has been mostly steadily climbing since the spring, with a bit of a plateau in the late summer. Since then, things have only gone in one direction.
As someone who is also looking to purchase another vehicle, it’s hard for your author to recommend anything other than waiting until the market reverts to something approaching normality. Unless you’re totally fine with paying more for a vehicle you probably didn’t want in the first place, and may well cost less in a few months, there really isn’t a benefit to buying now. Obviously, that advice doesn’t pertain to unfortunate people who absolutely must purchase a vehicle to ensure their current transportation needs are met and are being taken advantage of by the entire industry.
[Image: Gretchen Gunda Enger/Shutterstock]
Land Ark on Dec 21, 2021
28-cars-later: If you read this, can you pull the latest auction results for 2018 Jag XF Sportbrakes? I have my eye on one locally and it seems like it's about the only car that hasn't appreciated over the last 12 months. All of this makes me think cars were under priced. If people in great numbers are paying dealer markups at a time when supposedly unemployment is high, it seems more likely that prices will remain high as there is clearly the market ability to bear the current trend. Which ultimately is good, I guess, since manufacturers will have the ability to price EVs so they they can make a profit and people will still buy them.
Ajla on Dec 21, 2021
I think a few of you are too much on the doom side. Production volume will eventually go up and prices on new and used vehicles will fall. I don't think it will be next year but it won't take until 2033 either. Some manufacturers might have it in their heads they can "new normal" low supply but unless their business cards say "Ferrari" it isn't going to work.
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