When people talk about the car industry, what comes to mind is usually new cars, however, an essential part of the automotive industry is used cars.
If you’re checking out ads or trying to make inquiries about used cars you can purchase, you’ll probably find that there’s been a surge in the price of used cars. Finding an economical, used car has become extremely difficult.
Why Are Prices Skyrocketing?
A reason why the prices have skyrocketed is due to the pandemic; car plants had to close up, and due to that, the supply in stock started to deplete. Due to this, many people have had to turn to used cars if they still wanted a car.
This has led to a rise in cars’ prices due to the influx of buyers for used cars; the inventory for used cars has been declining.
An abundance of used cars is what keeps the prices steady, but with the newfound popularity of used cars, inventories are shrinking, leading to an uprise in prices.
Dealerships are competing against each other to fill up their lots. Many people turn to online marketplaces to get used cars due to the shortage, and even then, the prices are amazingly steep.
Even harder to find are cars that are five years old, therefore, the available cars are those that are over 3 years old are increasingly in high demand.
Trucks and crossovers are also making an entry into the used car market, and this only means that the prices are unlikely to climb down soon.
There is a surge in demand for used cars due to a lack of supply of new vehicles, making them expensive because the demand outweighs the supply.
Another reason why used cars are becoming expensive is that typical new-vehicle shoppers consider purchasing used cars as a financially responsible purchase, meaning spending less right now because of the current uncertainties about job security is regarded as a wise move.
The coronavirus pandemic has paused on new car production because automobile manufacturers are seriously gearing towards the production of electric cars.
The used ones’ values begin to move quickly, making it more expensive and hard to find because there are no longer manufacturing them.
During the pandemic lockdown, when economic stimulus payments were distributed as part of the $2 trillion CARE act in April, many Americans splurged on used automobiles to contain their boredom while also spending on essentials.
Prices for used cars typically fluctuate under economic hardship, and this is no different during the lockdown, and the used car market is proving to be incredibly volatile.
Car shopping experts at Edmunds surveyed the high rise of demand for used cars, and it was observed that all used vehicle pricing increased by more than $700, to an average of $21,558.
Edmunds also points out that this shift is a historical one, considering that this time of year usually decreases used car pricing.
Experts note that new vehicle shortages and favorable financing conditions drive increased consumer demand in the used market.
Another reason is that the incentives on used cars are becoming tempting to used car buyers.
For instance, Chevy is offering hefty cash back incentives on particular Silverado trucks, other car manufacturers such as Subaru are offering zero-percent financing for up to 63 months.
Also, dealers in used cars are giving incentives jut to recover those sales lost earlier in the year.
Another reason why used cars are expensive is that the gap between new and used is getting smaller and smaller due to lack of stock because of a shortage of supply.
We must also know how the second-hand market works and what differentiates it from buying a new car.
A report from J.D Power insinuates that retail prices have gone up by 3.9 percent, which is about the highest level for June.
Supply and demand work somewhat differently. When many people are shopping for a new car, discounts may be less.
When hardly anyone buys that car, the discounts are more significant, but they still move around a base price set by the manufacturer, and the number of units manufactured adapts to what people ask for.
This is not the case in second-hand cars; if there are 1,000 people in America looking for a 2010 Volkswagen Golf 2.0 TDI in a month, and there are only 700 cars available, the price goes up much more.
The automobile industry is facing an unprecedented transformation.
Manufacturers from all over the world are on the verge of a significant change, such as the electric car.
A transition for which they are investing much money, but it is also being used as an argument to lay off thousands of workers. As such, people are turning to used cars. Thus the demand for it has gone up.
Pros of Used luxury car
Aesthetics: It is undeniably attractive with excellent aesthetics, heads turn when a luxury car passes, and the interior usually uses better materials than generalists (hence also its
Lower depreciation: The car’s first owner has already suffered a significant blow of the vehicle’s loss of value.
Also, as a general rule, used luxury cars retain their value much more than generalists so that the investment will be less risky.
Safety: When you look at which cars had standard traction and stability control, front or side airbags, you see that just over five years ago, you had to look for cars of more than $20,000, and they are the ones who usually got the best grades.
Cutting-edge technology: Historically, luxury cars have offered the latest and greatest safety features, as well as an entertainment technology, before they hit the higher-volume models.
It is common to find older than five years button start, automatic windshield wipers, and lights in cars older than five years.
Buying a used car these days has become a bit crazy, but it is still vital that you go for what’s right for you.
Hopefully, with the easing of the lockdown, car manufacturing will resume, and the supply would finally be on par with demand.
When new options arrive at dealerships for customers, spending on a used car will become less expensive.