Used Car Shoppers Might Find the Best Deals over 100,000 Miles
With used-car prices up an average of 14 percent this year, it's good to keep in mind that cars last a lot longer these days.By July, used-car values found their legs. And by October, used-car prices had made record-breaking leaps. Now, six months later, prices still hover at altitudes that require supplemental oxygen. CarGurus' tool for tracking used-car price trends shows the average price of a used car is $23,723, up almost 14 percent compared to this time last year. That's more than 10 times the 2020 rate of inflation. Every vehicle segment has seen gains, the smallest bump being about 5 percent for hatchbacks and wagons.
DETROIT — When it was new, the window sticker price on a typical 2019 Toyota Tacoma SR double cab pickup was just under $29,000. Two years later, dealers are paying almost $1,000 more than that to buy the same vehicle, even though it's used.
Then they're selling it to consumers for more than $33,000.
Welcome to the wacky world of U.S. car and truck sales, where the pandemic and a global shortage of computer chips have pushed prices to record levels.
In the past year, used vehicle prices on average have climbed 30%, according to Black Book, which tracks car and truck data. That's created many crazy situations where high-demand vehicles are selling for more than they did when they were new, said Alex Yurchenko, the company's senior vice president of data science.
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“The market is very strange right now,” said Yurchenko. “Dealers need the inventory, so they are paying lots of money for their vehicles on the wholesale market.”
Yurchenko has found 73 models of 1- to 3-year-old vehicles being sold at auctions (where dealers buy their vehicles) for prices above their original sticker, the manufacturer's suggested retail price.
Used vehicle price increases accounted for one-third of the large rise in inflation last month, according to the Labor Department. Prices shot up a record 10% in April and another 7.3% in May, as inflation spiked 5%, the biggest 12-month increase since 2008. The average used vehicle cost $26,457 this month, according to Edmunds.com.
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The Final 4C: 2020 Alfa Romeo 4C Spider 33 Stradale Tributo
You'll miss it, even if you never really wanted it. The 4C has been on sale since 2014, so it's not like you didn't have a chance to buy one. But you didn't buy one, did you? You can't have one of these final 4C Spider 33 Stradale Tributo models, either. All 33 for North America have already been sold. Considering the 4C's microscopic sales through the years, that these last ones have been snapped up immediately is surprising, too.
Many of the models Yurchenko found were high-priced trucks and SUVs or highly sought-after loaded-out vehicles, including the high-performance Ford F-150 Raptor pickup, the 2019 Jeep Wrangler Unlimited Rubicon SUV and the boxy Mercedes G-Class AMG63 high performance SUV.
But the two-wheel-drive Tacoma SR is the lowest-priced model of Toyota’s top-selling small pickup. To be sure, higher end versions of the Tacoma also were on the list, but even more mainstream vehicles are selling for more than their original prices. For instance, the 2020 Kia Telluride and Hyundai Palisade made the list even though both are considered good values compared with more expensive SUVs with three rows of seats.
Yurchenko says the crazy prices are moving further into more ordinary vehicles. “Before we get through this, prices for many mainstream vehicles will get closer to their manufacturer's suggested retail price,” he said.
Don't expect the classic Memorial Day car deal this weekend
Automakers are spending way less on incentives as new vehicle inventory remains low. You may end up paying MSRP -- or more -- this weekend.Released Thursday ahead of the holiday weekend, JD Power's forecast shows auto sales continue to boom following the worst of the pandemic. Retail sales are expected to rise by 34% compared to May 2020, and grow by 10.6% compared to May 2019, for a non-COVID-19-related baseline.
It all started in April and May of last year, when U.S. automakers were forced to close factories for eight weeks to help stop the novel coronavirus from spreading. That cut production, limiting inventory even as demand remained surprisingly strong.
The factories came back faster than expected, and in the meantime, computer chip makers had switched to manufacturing semiconductors for phones, laptops, gaming systems and other consumer electronics. That created a shortage of automotive chips, which is forcing car companies to temporarily close factories, leaving some dealers with few new vehicles.
The lack of new vehicles and higher prices have sent more people into the used vehicle market, so demand is high there, too. Plus, rental car companies, normally a source of late-model used vehicles, are keeping their cars longer because they can't get new ones, Yurchenko said.
At present, consumers who have to replace a vehicle don't have much choice. “Unfortunately, if you need a vehicle, you'll need to pay the price,” Yurchenko said.
But there are signs that price increases are starting to slow. Used car prices rose 0.75% last week, the lowest weekly gain in 17 weeks. Trucks and SUV prices grew 0.68%, the lowest weekly gain in 15 weeks, according to Black Book.
A small victory: Used-car prices slip from dizzy heights
A small victory: Used-car prices slip from dizzy heights (Associated Press) Your browser does not support this video Until the pandemic flattened the economy in March 2020 and shrank the supply of both new and used vehicles, average wholesale used vehicle prices paid by dealers rose only a little every year. Average prices briefly fell in April last year, only to soar over 60% to a peak in May this year, according to data kept by Manheim, a group of auction houses where dealers buy vehicles. Any decline, however slight, would represent welcome relief for buyers.
Karl Jensvold, owner of PricedRite Auto Sales, a used vehicle dealer in Lincoln, Nebraska, said he's seeing wholesale prices leveling off, but he doesn't expect them to drop anytime soon. “I think the normal used car market has reset to a different price point,” he said. “I don't think we'll see the prices (from) before COVID for a while.”
Yurchenko said at some point prices will have to go back to normal and used vehicles will depreciate once again. The timing depends on how long it takes to get more computer chips so automakers can resume normal production, he said. “Once the new inventory levels start increasing, that's where the pressure on the used market will be relieved,” he said.
Some used vehicles now costing more than their original sticker price originally appeared on Autoblog on Tue, 22 Jun 2021 17:39:00 EDT. Please see our terms for use of feeds.