After a brief dip in prices, the used car market is once again experiencing a surge in demand and prices are increasing rapidly. According to recent reports, dealerships are struggling to get enough affordable cars on their lots, and those that do offer financing to buyers with poor credit.
The Reason Behind the Rise in Used Car Prices
One of the primary reasons for the current rise in used car prices is the ripple effect of the Covid-19 pandemic. As more people opt for used cars due to financial constraints after losing jobs during the pandemic, new car sales have fallen. This has led to stunted trade-ins and fewer vehicles being purchased by rental car firms. Stimulus checks sent to most American households have also resulted in an increase in demand for new or used vehicles, leading to a fall in supplies of used cars.
Impacts of Decreased New Car Sales
Sales of new vehicles last year fell almost 3 million below normal levels, resulting in a dramatic drop in trade-ins and subsequently fewer used cars for sale. Additionally, as people now prefer affordable cars due to financial constraints because of Covid-19 related issues, fewer trade-ins are landing on dealer lots.
Changes in Used Car Prices Over the Last Year
Used car prices have experienced significant changes over the past year, with some models seeing large price drops while others have risen considerably. Reports suggest that overall, used car prices are down 8.7% from a year ago and almost 5% since September.
Luxury models tend to depreciate faster and have fallen more than 20% over the last year. The Tesla Model 3 and a few other models have also dropped by double-digit percentages over the past six months. Some hatchbacks and coupes’ pricing has fallen more slowly than those for SUVs. However, some models like the Chevrolet Bolt and Nissan Leaf have seen price increases.
The Current State of The Used Electric Vehicle and Hybrid Market
The supply chain recovery led to an 8.7% drop in used car prices over the past year. Hybrid prices have only marginally decreased at 2.1%, and some models like the Chevrolet Bolt and Nissan Leaf have seen price increases. Luxury vehicles like the Mercedes-Benz S-Class and Porsche 911 are exceptions to the trend, with price increases of 11.8% and 10.6%, respectively.
The drop in EV prices reflects the average consumer’s unwillingness to pay higher prices for a used EV, possibly due to factors like inflation and interest rates. Reports also suggest that prices for electric vehicles have experienced a significant decline of 13.9%, with Tesla Model 3 leading the pack.
The Future of Used Car Prices in the US
Considering current trends, it is unlikely that used car prices will fall back to near their pre-pandemic levels anytime soon. As auto loan rates continue to rise this year due to Federal Reserve continually raising interest rates, affordability will likely become a significant issue affecting car sales.
Moreover, used car inventories are likely to remain crimped for the foreseeable future because of the pandemic situation around the world. In conclusion, although there have been fluctuations in pricing over time, increasing demand seems to be ruling the market now, making it difficult for buyers on tight budgets.
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