Used Car Prices Soar Amid Ongoing Shortage In San Diego
Used Car Buyers Beware: Defects and Safety Risks
- Auto buyers looking to save some cash by opting for a used set of wheels are in luck — if they’ve got deep pockets and can wait years to drive away.
The average used car now costs more than $27,500, according to Black Book. That is up more than one-third from January 2021, a whopping increase over the course of just one year.
And that’s not even the worst part: 24 percent of those surveyed said they expect prices on used cars to climb another 5 percent in the next 12 months. Only 10 percent see an improvement in deals on pre-owned vehicles, while 56 percent said they believe deals will get worse — signalling what could be yet another price hike for used cars in the near future.
“Pricing across the board continues to be remarkably strong, which is reflective of both low new-car sales volume but also an ongoing shortage of used vehicles for sale on dealer lots,” said Anil Goyal, senior vice president of Automotive Valuation and Analytics at Black Book. “This price strength will likely carry over into next year as well.”
A major factor behind a lack of inventory is due to carmakers cutting back on leasing programs amid a limited number of leases available from dealerships. That means fewer used cars coming onto the market without enough time before they must go back to their parent company or get auctioned off again — often with little hope of ever making it to retail.
“This year has seen the lowest new-car volume in decades, so for dealers to be selling thousands of vehicles per month is very strong,” said Jonathan Smoke, chief economist at Cox Automotive. “But unsold supply is rising quickly as well, which points toward rising used prices and added pressure on new-vehicle pricing.”
The industry trade publication reported that newer models are also suffering from a lack of inventory thanks to automakers tightening up loose credit standards after years of too many vehicles being sold to subprime customers. Meanwhile, the subprime customer themselves are beginning to take out fewer loans due to tighter lending standards along with rising interest rates that have made monthly payments more expensive.
The auto industry itself is merely a reflection of the strength of the economy. The U.S. unemployment rate dropped to 3.7% last month, marking a land-speed record-tying 1868 for the lowest jobless rate ever recorded during a period of economic prosperity — something that automakers have already taken into account both when it comes to producing and selling cars as well as increasing salaries for their employees over the course of 2019 with some companies bumping paychecks by up to 15%.
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