Oddities in the Used Car Market May Require Government Intervention

When you go to buy a used car, you expect to find a vehicle that’s been driven for several miles at a lower price than when it was new.

Something very strange has happened in the automotive market and we’re starting to see used models that are more expensive than when they were new. In fact, some dealers are having to pay more for the models they choose at auction than ever expected.

Caused of Increased Prices in the Pre-Owned Market

Let’s think about the events of the past two years to understand what’s going on. Last year, the COVID-19 Pandemic struck the globe and caused nearly every business to be shut downas scientists worked to finda way to combat this new disease. Automakers shut most operations down and canceled orders for the parts needed to build vehicles. Some companies in this industry turned to building ventilators or offering other items to assist healthcare workers.

With auto plants shut down, it was necessary for parts manufacturers to figure out where else they could sell their items. Thus, the semiconductor shortage was created for the auto industry. People were at home and buying more game systems than ever before, which caused a dramatic increase in the gaming industry.

Auto plants were able to open up much sooner than originally expected, which meant automakers needed to order the parts that they had canceled only a few months earlier. Unfortunately, the semiconductor manufacturers didn’t have the capacity to offer products to this industry.

Couple the lack of inventory with three semiconductor plants that were part of disasters in their respective areas and you have a serious problem. This serious problem is still taking place today.

Used Vehicles are More Expensive Now

If automakers can’t offer new vehicles to the market, those who need an upgraded vehicle have to turn to used models that already have all their parts. This has caused some models that are only one to three years old to be sold at auction for prices that are above the original sticker price. As we continue to see a shortage of parts for new vehicles, the auction price of used cars continues to increase every month.

The Bigger the Vehicle, the More You’ll Pay Above Sticker

In the used car market, we are now seeing spiking prices for large SUVs and used trucks. These vehicles have increased in price more than any others. The more specialized, and pricey the vehicle is, the more above sticker you’ll have to pay. Dealers are buying many of these vehicles at auction for more than the original sticker price and then adding their own markup to the price.

How Can Used Car Prices Get Back to Normal?

Do we need government intervention to flatten the price of used vehicles? What’s it going to take to make sure new models can be made in the numbers needed? We want things to get back to normal, but just like we were told when the pandemic struck, we need to be patient and understand that things will only take time.

Right now, we are seeing a massive overlap of 2021 and 2022 models in the automotive world and this may move to the 2023 model year as well. In fact, for the next couple of model years, there’s a chance that no upgrades will be offered on vehicles that come off the production line. The used car market could have a few years of amazing success which might not be a bad thing.

The Good and the Bad of the Current Used Car Market

While we most likely won’t have to rely on government intervention to get things back on track and this change could be a good thing. While you might have to pay more for the used vehicle that you want to drive, a shortage of new models might mean more used vehicles are being sold during the next couple of years. After record sales prior to the pandemic, this could thin out the number of used models in the market.

If you’ve been looking forward to a time when you can buy a used model at a great price, you might have to wait a bit longer. It will certainly take some time before the automotive market is back to normal and we see the large number of new models that we had prior to the pandemic. You’ll have to figure out if you’re willing to pay the higher prices for pre-owned models when you visit a dealership.