A few months ago, a woman visited Jeff Schrier’s used car park in Omaha, Nebraska. She says she’s on a tight budget and is desperate to get a car to commute to work.
She was shown three cars for her limited price, about $7,500. Schrier said the woman was stunned.
″ ‘That’s what I get for $7,500? ‘” He recalled her words. Cars that were older or had more mileage than she expected to have something to replace a car that had been in an accident.
The woman ended up settling into a 2013 Toyota Scion with a whopping 160,000 miles on it. Schrier is not sure he made any profit from the deal. “We just helped her,” he said.
When used car prices cross whatever seems reasonable, that’s the scenario playing out at many auto dealerships across the country. Prices rose so high, so quickly, that buyers were increasingly being priced out of the market.
According to Edmunds.com, the average price of a used car in the United States in November was $29,011 – 39% higher than just 12 months earlier. And for the first time as anyone can recall, more than half of households in the US have less than what is considered necessary to buy an average-priced used car.
The days when anyone with a steady income could hang out in a car and buy a reliable second-hand car or buy their kid’s first car for a few thousand dollars are gone.
“I’ve never seen anything from this far away – it’s crazy,” said Schrier, who has sold cars for 35 years. “It’s pretty frustrating for a lot of people right now.”
When the government reported that consumer inflation spiked 6.8% in the 12 months ending November – the steepest increase in nearly 40 years – the biggest factor, aside from energy, was used cars. And while the rate of growth is slowing, most experts say the soaring car prices are unlikely to ease in the near future.
The cause can be traced directly to the pandemic that broke out in March last year. Auto factories have halted production to try to slow the spread of the virus. As new car sales drop, fewer people trade in used cars and trucks. At the same time, demand for laptops and screens by people stuck at home has led semiconductor manufacturers to shift production from cars, which depend on such chips, to devices. consumer electronics.
As a faster-than-expected economic recovery spurs demand for vehicles, auto factories have been trying to resume full production. But chip makers can’t respond quickly enough. And rental car companies and other car buyers, unable to afford new cars, have stopped selling older ones, thereby adding to the used car shortage.
The gloom when the market for used car buyers, the shortage of computer chips also causes new car prices to soar. According to Edmunds.com, the average new car is approaching $46,000.
Even so, used car prices are likely to compete closer to new car prices. Since the outbreak of the pandemic, used car prices have increased 42% – more than double the increase of new cars. Last month, the average used car price was 63% of the average new car price. Before the pandemic, the rate was 54%.
At this point, Schrier had to tell lower-income buyers that he had very few used cars to sell them.
“What was once a $5,000 car,” he said, “is now $8,000. What used to be $8,000 is now $11,000 or $12,000.”
Including taxes, fees, 10% off and around 7.5% interest, the average used car now costs $520 a month, even when financed on average for nearly six years, Edmunds calculates. maths.
Ivan Drury, a senior Edmunds manager, said that while he doesn’t track used car prices against household income, he thinks November marked a record “in the worst way” possible for the ability to pay”.
Monthly payments for a used car averaged $413 two years ago, $382 five years ago, and $365 a decade ago, he noted. The average November payment was $500 or more for a used car, Drury said, which is the average required five years ago for a brand new vehicle.
Used car prices are so high that Karl Hogan of Canonsburg, Pennsylvania, near Pittsburgh, was able to quickly sell his 2007 Toyota Tacoma pickup truck last month, with more than 170,000 miles on it. Even with the age and mileage of the car, a man from Ohio dropped more than $6,500 on it.
Hogan didn’t need to budge from the asking price. When some would-be buyer offered him less money, he told them, “I have 12 others after you.”
A week before the sale, when he bought his new Tacoma, Hogan was on the other side of the equation. Dealers won’t budge from his $38,000 sticker price.
“If I don’t take it,” Hogan said, “there are three people waiting. I can’t get off the bus, but I want a new truck.”
David Paris, a senior manager at JD Power, notes that used car prices are directly tied to new car prices. Although some carmakers report that the supply of computer chips is gradually improving, prices paid by dealers at used car auctions continued to rise in November. know.
“We haven’t seen any price drops, which is extremely rare at this time of year,” he said.
New car dealerships have about 1 million vehicles across the country – just a third of the usual supply, Paris said. And most of it has already been sold.
Due to pent-up demand from consumers, new car prices are expected to remain at historic highs until supply returns to around 2 million or 2.5 million and automakers resume price drop, possibly in 2023. Once new car prices drop, used car price pressure will eventually follow.
However, even then, the availability of cars will be scarce as the traditional source of second hand vehicles – cars transferred from rental and sale operations or sold by rental companies – has essentially been exhausted. .
Over the past decade, cars returned on two- and three-year leases have been the leading source of near-new used vehicles. But that’s when more than a third of U.S. new car sales were rental cars, the number now falling to 22%, Edmunds’ Drury said. Because there aren’t many new cars, people whose leases are about to expire often buy those cars after their lease ends.
Rental companies, another key source of second-hand cars, are currently unable to buy new ones and are keeping the ones they have. Some rental companies even buy used cars. With all those factors in mind, Paris expects the shortage of used cars to worsen by 2024.
Among the few consumers that benefit are those who want to sell a used car and not necessarily replace it. The average trade value in October was $9,000, Paris said, double what it was a year earlier.
But for those who do not have the means to do business and have only a modest income, the options are few and none. JD Power’s Paris says that if they can afford it, buyers should consider a new car. Recently, he managed to get a few thousand dollars off the sticker price on a new Ram pickup, even though he had to travel from the Washington, DC, area to Philadelphia to reach an authorized dealer. which he found by searching internet forums.
“If you work hard enough and are willing to wait and travel,” he says, “you can find deals on most brands.”
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https://www.winknews.com/2022/01/09/29000-for-an-average-used-car-would-be-buyers-are-aghast/ $29,000 for an average used car? Buyers will be amazed