If you’re trying to buy a used car right now, be prepared to spend way more than you would have even a few months ago.
What’s happening: Pre-owned car prices are soaring nationwide for several reasons. For one, a computer chip shortage has slowed production of new cars, which means there are fewer used cars down the line. Secondly, there’s pent-up demand from customers who put off car-buying last year during the pandemic.
Customers have lots of disposable income, meaning they’re willing to pay high prices, says Jeff Dyke, president at Charlotte-based Sonic Automotive.
- “You’ve got this perfect storm,” Dyke tells Axios. “It bodes well for the industry.”
By the numbers: At Sonic’s Echo Park dealerships, prices are up 30-35% for used cars from the beginning of the year, Dyke says. A car that would’ve sold for $20,000 in January routinely sold for $27,000 in June, he adds.
- The national retail price of used cars and trucks surged 10.5% last month after rising 7.3% in May, the Labor Department reported last week. Year over year, used vehicle prices are up 45.2% nationwide.
- In Charlotte, there are even some cars that currently cost more used than they do new, according to auto research firm ISeeCars.com. Those cars include: Dodge Charger, GMC Sierra 1500, Jeep Grand Cherokee, Toyota Tundra and Ford F-150.
“Demand has never been higher,” Dyke says. “You’d think with a price increase in the 30% range that demand would drop off but that’s not the case at all.”
The supply/demand imbalance is prompting customers to sell their own cars more often these days, too, Dyke adds.
- This is good news for sellers, as dealers are willing to pay more to fill up their lots, as Cars.com recently reported.
The trend is playing out in the car rental market, too. Last month, renting a car or truck was 87.7% more expensive than it was in June 2020, per Labor Department data.
- Amid the plunge in travel last year, car rental companies sold off their fleets as they tried to stay afloat, as Quartz has reported.
- They’re now trying to replenish their inventories at the same time chip and auto parts shortages slow new car production.
Yes, but: Used car prices may soon be stabilizing as supply improves. “You’re going to see inventories progressively get better as we march toward Q1 2022,” Dyke says.