If you’ve done any kind of shopping in most of 2022, you know that inflation is rising at an alarming rate. It’s affecting more than grocery shopping, though—inflation has hit the automotive industry very hard.
Where Car Shoppers Feel Inflation the Most
The place we’re seeing the most change is in used car sales. The availability and price of used cars have fluctuated so much that new studies have found cars to cost as much as $10,000 more now than they would under normal market conditions.
But why is it like this, and do used cars truly cost so much more now?
Looking at the Numbers
$10,000 more for a used car sounds like a crazy amount, but there’s solid information to back it up.
Consumer price index information from the Labor Department shows that prices for used cars and trucks have increased by 7.1% in the last year. In the last month alone, prices have increased by 2.2 %.
In concept, the numbers look like this: the average listing for a used car last month was $33,000. Under normal market conditions, assuming that deprecation values hold, the average would be $23,000.
That’s where we get the idea of used cars costing up to $10,000 more than they should. If we compare the current automotive market -with extreme inflation, gas price increases, and COVID-related supply problems -with the pre-pandemic market, we find that price differences average nearly $10,000.
Even worse, this extreme price change is showing no sign of stopping. So that begs the question: why is this happening? What do we know about what’s causing, and therefore what can control this crazy automotive market price increase?
Why It’s Happening
It’s tempting to say all of this is caused by inflation, but that’s not entirely true. While inflation is increasing the price of used cars and trucks, other factors are doing far more to create this over-inflated price problem.
There’s one primary influence outside of inflation and interest rates that’s causing the cost of used cars and trucks to go up so much -supply and demand.
Demand for vehicles hasn’t been reduced despite all the economic and automotive changes in the last few years. However, supply has been significantly disrupted. Between microchip deficiencies that prevented new cars from being manufactured, labor shortages, and overseas warehouse problems, supply is far lower than anyone could have predicted.
This leaves us with used cars that can only be acquired one way -by people selling or trading their old vehicles. However, people are holding onto their old cars for longer or selling them at a higher value because they’re worth more in this new supply and demand market. That’s what has driven the price of used cars higher than ever.
What will the future of used car sales hold? At this point, no one knows. So keep an eye out for more news about used cars, and consider what the best time to buy or sell could be for you in the middle of this roller coaster ride of a market.
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