If you’re looking to sell or trade-in your vehicle, now is the perfect time. Across the nation, the used car market is surging. The trade-in value and selling price for used cars have hit record-setting highs. And while shifts in sales year-to-year aren’t unheard of, the price jump in the last year is unparalleled. From May 2020 to May 2021, the selling price for used vehicles has soared 30 percent, according to the U.S. Bureau of Labor Statistics. Right now, the average price for a used car sits around an all-time high of $25,463.
The reason for this can be explained by the shortage of vehicles as a result of the pandemic. With the economy slowly recovering and restrictions lifting, the demand for used cars grows each day. Consequently, used cars have never been worth more than now.
But, why did a shortage happen?
To start, the pandemic completely altered many lines of work, and the automotive industry was no exception. Global shutdowns directly impacted the rental car industry, as well as new car manufacturing, creating a domino effect on anything automotive-related.
The used car market is dependent on new car manufacturing and the rental car industry.
Manufacturers cannot make pre-owned vehicles. This means the used car market relies on different sources to generate its inventory. A primary contributor to this is rental car businesses refreshing their inventories with newer vehicles. Typically, this is done every 12 to 18 months. But when travel restrictions started in March 2020, the rental car industry took a major hit. This led to many agencies rapidly selling their existing fleet without purchasing replacements. Without this consistent cycle of gradual selling and replacing, fewer used cars entered the market.
Another way the used car market is restocked is through drivers turning over leased vehicles or trading in old cars for newer ones. However, with record levels of financial anxiety and unemployment, many chose to stay with their current car last year. Banks have also been more lenient allowing delayed car payments, which means fewer cars entering the market via repossession.
All this adds up to a significant amount fewer used cars ready to be resold. And while people were slower to buy cars in 2020, most of those who did chose to go the pre-owned route. According to data from Statista, there were nearly 3x as many used cars sold in 2020 as there were new cars sold.
There aren’t enough vehicles entering the market.
As cities reopen and the nation slowly recovers, many drivers are eager to get back on the road. Air travel restrictions increased the popularity of road trips in 2020, and it appears the trend will continue throughout 2021. The increase in demand for both new and used cars can also be attributed to historically low interest rates. This, on top of people receiving their stimulus checks and annual tax refunds, means more consumers are ready to make bigger purchases now.
However, the current ‘crisis is that there are 25% fewer used cars for sale now than there were in 2020, according to data from Cox Automotive. But, the problem is there’s also been a much higher demand for them. According to Cox data, used car sales increased by 52% from early 2020 compared to that same period in 2021. With fewer vehicles to sell, but higher demand, the value of them increases.
But, if there aren’t enough used cars, why don’t consumers just buy new vehicles?
There’s also a shortage of new vehicles being manufactured.
Currently, there is a global shortage of semiconductor computer chips available. These chips are responsible for running the information and entertainment systems in the vehicle. Newer cars can have around 3,000 or more chips. Without them, the car cannot function, meaning they can’t be sold. According to the U.S. Bureau of Economic Analysis, the number of new cars produced in North America at the beginning of 2021 totaled 396,00, and it now sits at 254,800.
On the bright side, those looking to sell or trade-in their vehicle are benefitting the most.
If you’re in the market for an upgrade, it’s a good time to take advantage of the current market conditions. Currently, used vehicles are selling and being traded in for thousands of dollars worth more than normally. If you’re curious to know how much your vehicle is worth, contact us and we’ll help you out.
Call us at 888-332-1270 or contact us online here.
Like this feature? See all vehicles with
Like this feature? See all vehicles with
Like this feature? See all vehicles with