If a consumer is looking to purchase a used vehicle – regardless of make, model, or year – that potential buyer has likely suffered a bit of sticker shock due to a huge surge in the price of used vehicles. Regardless if a buyer is perusing Facebook Marketplace or a used car lot, the prices of used cars, trucks, and SUVs is staggering.
Jeff Schrier, who owns a used car lot in Omaha, Nebraska, recalls a potential customer who came to his establishment looking for a used vehicle she could use to commute to work. The customer told Schrier that she was on a tight budget, approximately, $7,500. Schrier showed the woman three cars in that price range, much to the woman’s dismay. The cars she was shown had a lot more miles on them as well as more years than what the customer expected. She was looking to replace a car that had been totaled in an accident, and she was surprised at her choices.
Eventually, the customer settled on a 2013 Toyota Scion with 160,000 miles on the vehicle. Schrier said he doesn’t think he made any profit on the vehicle as he was attempting to “help her out.”
Dealerships across America – and private sellers as well – are seeing the same scenario. Buyers are simply priced out of purchasing a used vehicle due to the sharp increase in pre-owned vehicle prices. Edmunds.com released the average price of a used vehicle in the United States for the month of November 2021 was up a whopping thirty-nine percent from the same time period in 2020.
For the first time in recent memory, at least half of American households have less income than is considered needed to purchase the average-priced pre-owned vehicle.
Even cars and trucks from the 1990s and early 2000s are up, and this isn’t exclusive to vehicles considered “in high demand,” such as “OBS” trucks or sports cars from that era. Yes, vehicles that aren’t considered “collector” pieces are raking in an astounding price. Go to any forum for a truck from the late 90s – they are commanding the same price today as they did when they rolled off the production line – sometimes $15,000 to $20,000 for a stock vehicle.
Parents often sought out these vehicles as a “first vehicle” for their children, especially if their child wanted a “project” vehicle to work on. It seems that the days of being able to walk on a used dealer’s lot or to purchase from a private seller for a few thousand dollars have disappeared.
Jeff Schrier, the owner of the used vehicle dealership, says the prices of used vehicles are “craziness,” and relates that he has “never seen anything remotely close to this.” Scrier has been in the used auto business for over three decades, and laments that the prices of pre-owned vehicles is “quite frustrating.”
When inflation jumped up to 6.8 percent as of November, aside of the price of energy, used vehicles showed the highest price increase. While the rate of inflation appears to be easing somewhat, auto experts believe that the price of a used vehicle isn’t likely to come down any time soon.
Economists say the sharp increase in auto prices, particularly used auto prices, is a direct result of the shutdown of automaker production lines in 2020. When new cars weren’t available for purchase, customers began seeking used vehicles. Remote work led to a demand for the production of chips for laptops and other electronics. The chip shortage in autos you’ve likely heard about – the companies who were making chips for cars saw a demand for making chips for other electronics, which led to a decrease in making chips for cars. Those dealership lots that were empty or nearly empty for quite some time – that’s a direct result of the lack of availability of these chips.
Auto makers are working full-time once more, but the chips necessary to properly run the vehicles haven’t met the same amount of production as the vehicles themselves. To add insult to injury, this lack of new cars drove the price of new cars higher as well.
The average price of a new vehicle is upwards of $40,000.
Edmunds calculated that the average payment per month for the “average used vehicle” is approximately $520. That’s with a six-year financing period, as well. Supply is also down, which further drives the price of used cars. As of the end of 2021, barely one-third of the normal supply is available for purchase.
Experts warn it could be 2023 before the price eases back to more normal numbers.