She was shown three cars priced at her limit, roughly
"'That's what I get for
The woman eventually settled on a 2013 Toyota Scion with a whopping 160,000 miles on it. Schrier isn’t sure he made any profit on the deal. "We just helped her out," he said.
As prices for used vehicles blow past any seemingly rational level, it is the kind of scenario playing out at many auto dealerships across the country. Prices have soared so high, so fast, that buyers are being increasingly priced out of the market.
Consider that the average price of a used vehicle in
The days when just about anyone with a steady income could wander onto an auto lot and snag a reliable late-model car or buy their kid's first vehicle for a few thousand dollars have essentially vanished.
“I’ve never seen anything remotely close to this — it’s craziness,” said Schrier, who has been selling autos for 35 years. “It’s quite frustrating for so many people right now.”
When the government reported that consumer inflation rocketed 6.8% in the 12 months that ended in November — the sharpest jump in nearly 40 years — the biggest factor, apart from energy, was used vehicles. And while the rate of increase is slowing, most experts say the inflated vehicle prices aren't likely to ease for the foreseeable future.
The blame can be traced directly to the pandemic's eruption in March of last year. Auto plants suspended production to try to slow the virus’ spread. As sales of new vehicles sank, fewer people traded in used cars and trucks. At the same time, demand for laptops and monitors from people stuck at home led semiconductor makers to shift production from autos, which depend on such chips, to consumer electronics.
When a swifter-than-expected economic rebound boosted demand for vehicles, auto plants tried to restore full production. But chip makers couldn’t respond fast enough. And rental car companies and other fleet buyers, unable to acquire new vehicles, stopped off-loading older ones, thereby compounding the shortage of used vehicles.
Bleak as the market is for used-car buyers, the computer chip shortage has also driven new-vehicle prices higher. The average new vehicle,
Even so, prices of used cars are likely to edge closer to new ones. Since the pandemic started, used vehicle prices have jumped 42% — more than double the increase for new ones. Last month, the average used vehicle price was 63% of the average new vehicle cost. Before the pandemic, it was 54%.
At this point, Schrier has to tell lower-income buyers that he has very few used vehicles to sell them.
“What used to be a
Including taxes, fees, a 10% down payment, and an interest rate of around 7.5%, the average used vehicle now costs
To make that payment and afford such other necessities as housing, food and utilities, a household would have to take home about
“The average person," Palmer said, “can’t afford the average used car right now.”
Monthly payments for the average used vehicle, he noted, were
“People are going to have to make hard decisions, maybe cut back in other areas,” Palmer said. “It means that it’s stressful for a lot of families.”
Used vehicle prices are so high that
Hogan didn’t have to budge from the asking price. When some would-be buyers offered him less money, he told them: “I’ve got 12 other guys behind you.”
A week before the sale, when he bought his new Tacoma, Hogan had been on the other side of the equation. The dealer wouldn’t budge from his
“If I didn’t take it," Hogan said, "there were three people waiting. I couldn’t get any off, but I wanted a new truck.”
“We’re not seeing any softening in prices, which is extremely rare for this time of the year,” he said.
New vehicle dealers have about 1 million vehicles available nationally — scarcely one-third of the normal supply, Paris said. And the vast majority have already been sold.
Given pent-up demand from consumers, prices for new vehicles are expected to remain historically high until the supply returns to around 2 million or 2.5 million and automakers resume discounting, which could take well into 2023. Once new vehicle prices do ease, the pressure on used-vehicle prices would eventually follow.
Yet even after that, the availability of vehicles will be tight because traditional sources of used vehicles — autos turned in from leases and trade-ins or sold by rental companies — have essentially dried up.
For the past decade, cars returning from two- and three-year leases were a leading source of almost-new used vehicles. But that was when more than one-third of
Rental companies, another key source of late-model used cars, can’t buy new ones now and are holding the ones they have. Some rental companies are even buying used vehicles. Given all those factors, Paris expects the shortage of used cars to worsen through 2024.
Among the few consumers who stand to benefit are those who want to sell a used car and don't necessarily need to replace it. The average trade-in value in October, Paris said, was
But for people who have no vehicles to trade in and only modest incomes, the options are few to none. Palmer of
J.D. Power’s Paris says that if they can afford it, buyers should consider a new vehicle. He recently managed to get a couple thousand dollars whacked off the sticker price on a new Ram pickup, though he had to travel from the
“If you look hard enough and are willing to wait and travel," he said, “you can find deals across most brands.”
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