Here at Ideal, we’re all about saving money, and buying a used car instead of a new one is typically a great way to do that. However, if you’re considering purchasing a used car right now or in the next few months, I hate to break it to you, but you’re better off waiting. I know, I know, I’m essentially the fun police in this blog post. But with the state of the used car market, you’re going to end up paying way more than you would in any other year. So, what’s going on, and why have used car prices shot to the moon? When can we expect them to return to normal? Let’s dive into the details and find out.
Used Car Prices:
The average price of a used car on CarGurus skyrocketed to $22,470 at the end of 2020, an increase of $1,800 from the beginning of the year and a record high, according to Cox Automotive. This 15% increase in used car prices is well beyond the ordinary, especially considering that inflation was less than 1% in 2020. And the prices haven’t come back down in 2021; in fact, they’ve gone up even more. So, what’s causing this spike in used car prices?
The pandemic has had widespread effects across the entire economy, and the used car market is no exception. It has created a situation where there’s a lack of supply of used cars and a large demand among consumers for them, driving up the prices. The shutdowns of factories and the subsequent shortage of new cars have driven up the prices of new vehicles, leading fewer people to trade in their old ones for new ones. This has resulted in a lower supply of used cars in the market.
Rental services like Avis and Enterprise typically supply a large portion of the used car market by replacing their fleets with new vehicles and selling their old ones. However, with the travel industry suffering due to the pandemic, these companies are not replacing their inventory as often, meaning fewer used cars are entering the market.
The demand for used cars has also gone up, partly due to stimulus checks providing people with extra cash to spend. Additionally, with many people facing financial challenges during the pandemic, they’re turning to the used car market for more affordable options. This increased demand, combined with the dwindling supply, has driven prices to new heights.
It seems we’ll have to wait until the pandemic is behind us for used car prices to return to previous levels. Depending on how long it takes for that to happen, we’ll get our first glimpse of what the new normal will be for the car market. So, are you going to buy an overpriced used car, or stick it out in your old rust bucket and wait for prices to go back down? Let us know in the comments, and don’t forget to subscribe for more Ideal content. Here’s to living the Ideal lifestyle!