Why used car prices soared 26% during the pandemic
Looking for a used car?
Prepare for sticker shock. The shortage of microchips has slowed the production of new vehicles, steering buyers towards used cars, trucks and SUVs, and prices have risen dramatically as a result.
New vehicle inventory in California is down 75%, according to Jessica Caldwell, executive director of Edmunds, who recently surveyed state dealerships.
This shortage has resulted in price hikes as dealers charge a premium for those they still have on hand, Kelly Blue Book reports.
In August, the national average price of used vehicles rose 26.2% year-over-year to $ 6,454, according to iSeeCars.com. Things were worse in July when the annual price increase averaged nearly 32%, and in June when it reached 32.7%.
The report also breaks down the price increases by region, and Los Angeles ranked 33rd with an average annual price increase of $ 6,124 (up 24.8%) in August. LA is faring much better than the Fresno-Visalia region, which tops the list with an average increase of $ 7,524, or nearly 37%.
New York City recorded the smallest increase of $ 4,895, or 19.8%.
The 10 vehicles with the largest increases had price changes ranging from 1.2 to almost twice the average annual increase.
“As plant closures linked to the microchip shortage continue and the consequences of Hurricane Ida are expected to further increase prices, there does not appear to be any relief in sight for used car buyers. “iSeeCars executive analyst Karl Brauer said in a statement.
The COVID-19 pandemic has resulted in the temporary closure of dozens of factories. As a result, the supplies needed to manufacture the chips have not been available for months, and the auto industry continues to catch up.
The compact Mitsubishi Mirage tops the iSeeCar list with an average year-over-year price increase of almost 50% in August. This added $ 4,457 to the cost of the car, dropping its average used car price from $ 8,491 to $ 13,398.
Others rounding out the top five include:
– Nissan LEAF – up $ 6,370 (46.8%) to $ 19,990
– Chevrolet Spark – up $ 4,467 (44.7%) to $ 14,456
– Mercedes-Benz G-Class – up $ 45,992 (40.2%) to $ 160,465
– MINI Hardtop 2-Door – up $ 6,044 (34.8%) to $ 23,402
The report also lists used vehicles with the smallest price increases. They understand:
– Mercedes-Benz GLC – up $ 2,832 (8%) to $ 38,123
– Audi SQ5 – up $ 3,821 (9.1%) to $ 45,652
– Volvo XC90 – up $ 3,557 (9.3%) to $ 41,953
– Lexus IS 300 – up $ 2,924 (10.1%) to $ 31,987
– Audi Q5 – up $ 3,866 (12.7%) to $ 34,376
New vehicle prices are on a five-month slope.
In August, the average price paid for a new car reached $ 43,355, an increase of almost 10% from the previous year, according to Kelly Blue Book.
In surveys in late August, 48% of new car buyers said they were likely to postpone their purchases, the car research firm said. Of those still looking to buy, 25% said they would consider switching brands due to the shortage, while 19% were willing to consider a different type of vehicle than what they were initially looking for.
“With the ongoing inventory challenges that automakers face across the board, coupled with historically low incentive spending, car buyers end up paying the price – literally,” said Kayla Reynolds, analyst at Cox Automotive.
Ford cut vehicle production in North America in July and August due to shortages. In its second quarter earnings report, the automaker said supplies were improving, although it lost production of about 700,000 vehicles in the quarter.
Overall sales for September 2021 were down 17.7% year-on-year, but some models did much worse. Ford Fusion sales were down 99.5% and Ford Fiesta sales were down 100%.
General Motors said the chip shortage would cut revenue by $ 1.5 billion to $ 2 billion. The company has slowed down some of its assembly plants in North America due to the shortage.
Since the start of the year, US railways have transported more than 490,870 carloads of motor vehicles and parts. This is a 5.6% increase from 2020 volumes for the same period, according to weekly rail traffic data compiled by the Association of American Railroads.
On the surface, this would seem to indicate that the auto industry has rebounded from the COVID-19 pandemic. But this year’s gains are amplified by the abrupt shutdown in 2020 that halted most auto-related rail shipments during the March-May 2020 period.