Used Car Prices Continue to Increase; why?, and when will they Return to Normal?

 Used Car Prices Continue to Increase; why?, and when will they Return to Normal?

Written by: Jake Sandlass 

Currently, the used car market in the U.S is breaking records… and not in a good way. As of November 2021, the average price for a used car was $29,011; a 21.4% increase in cost from the same time in 2020. Consumers looking for vehicles are paying drastically overpriced amounts or simply deterred from purchasing a car. The average price of used cars increased every month from February to November of 2021 and shows no signs of stopping anytime soon; but what's causing this?, when can we expect prices to return to normal, and what impacts is this having on the standard of living for a lot of Americans? 

For one, this is adding a ton of cars to the road that are dangerous, have outdated safety features, worn out parts, and in need of an upgrade as consumers choose to limp their car along until the market recovers. Personally, I have heard from several mechanics that my car is unsuitable to be driving on public roads and has several safety concerns… However, since the repairs are more than the vehicle is worth and I would need to pay upwards of $15,000 for a decent car I’m choosing to limp it along until it either quits on me, or the used car market returns to normal. Also, America is not very catering to people without motor-vehicles. Lack of public transportation can make it very difficult, even impossible to get to and from work, school, etc. Thus, people in sticky financial situations who may have had a vehicle quit on them can struggle to make an income and have a drastic decline in quality of life. 

But why is this happening? Well, the skyrocketing price of cars can be tokened to a few different root causes. For one, the worldwide shortage of microchips has pushed up prices for new cars thus increasing the demand in the used-car market. Early pandemic, microchip producers shut down to protect the health of workers, however consumer demand for electronics increased causing huge back-ups that microchip producers are still working to recover from. This then caused car manufactures to be unable to finish vehicles creating an 8 million car shortfall in 2021. Car manufacturers are also significantly underemployed, Kelly Blue Book said car manufacturers had more than 584,000 jobs in October 2021 they were unable to fill. With fewer new cars being produced, there are less people trading in their used ones causing prices to increase. Dealerships who previously had hundreds of new cars in their lots now have fewer than 10, according to KPMG. 

The question that consumers awaiting a drop in cost ask is when will the car market return to normal? While it's hard to say forsure, experts aren’t expecting much of a change until 2023. It is all dependent on the supply chain; when microchip production can catch up to demand and car manufacturers can reach full employment. Patrick Gelsinger, CEO of Intel, told investors in July 2021, that it will take another one to two years for the microchip industry to catch up to demand and we will continue seeing increasing prices in the used-car market through 2022. However, he is hopeful that we will begin seeing significant change early 2023.