Used Car Prices Are Surging. Here’s Why You Should Buy Now

Well, it was nice while it lasted. For nearly a year, the average used vehicle in the United States had been edging toward affordable again for millions of people. The relief felt belated and relatively slight, but it was welcome nonetheless. From an eye-watering peak of $31,400 in April of last year, the average price had dropped 14% to $27,125 early this month. Now, with the supply of used vehicles failing to keep up with robust demand, prices are creeping up again, with signs pointing to further increases ahead. So many buyers have been priced out of the new-car market that fewer trade-ins are landing on dealer lots. Deepening the shortage, fewer used vehicles are coming off leases or being off-loaded by rental car companies. Average list prices for used car have edged up by about $700 in the past month, and Alex Yurchenko, chief data officer for Black Book, which tracks prices, expects them to keep rising at least into summer. “If you have to buy a used vehicle,” he suggested, “right now would be a good time.” Pete Catalano, a dealer in Independence, Missouri, near Kansas City, has been struggling to get his hands on enough affordably priced cars. Typically, Catalano and his daughter, who co-own Stadium Auto, would have about 50 vehicles on their used-car lot near Arrowhead Stadium. They now have only about half as many. Some of their rival dealers, Catalano said, enjoy a competitive advantage because they can afford to offer financing to buyers with poor credit. Squeezed by higher prices for gasoline, groceries and utilities, many of Catalano’s customers can’t afford either new or late-model used vehicles. Some would-be buyers he knows are using tax refunds just to make ends meet instead of buying a needed car. “A used inexpensive car is now becoming more and more of a luxury,” Catalano said. “What the market wants right now is not available, and that’s $3,000, $4,000 and $5,000 cars.” Behind the vehicle shortage and inflated prices is simple supply and demand. Much of the problem stems from the surging prices of new cars. In February, according to Edmunds, the average new vehicle in the United States sold for nearly $48,000 — beyond the reach of many consumers. Though the supply of new vehicles has inched up, they remain relatively scarce and expensive. Automakers still lack sufficient computer chips to produce enough vehicles to meet demand, a lingering consequence of pandemic-related supply shortages. Sales of new vehicles last year were about 3 million below normal levels. Fewer new-car sales mean fewer trade-ins, which mean fewer used vehicles for sale. With used prices rising again, analysts say buyers who can afford to do so should buy soon. Auto loan rates may continue rising this year as the Federal Reserve keeps raising interest rates. On used lots these days, bargains are hard to find. Even after accounting for the price drops of the past year, the average used vehicle remains about 35% above where it was before the pandemic erupted three years ago. At that time, the average price was $20,425. Once the government sent stimulus checks to most American households, demand for autos rose as many people spent their money. As they did, the supply of used vehicles fell and prices surged. By early last year, […]

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