Why Used Car Prices have Skyrocketed over the Past Year

Car buying over the past year has been extremely difficult, especially for high-schoolers, who do not necessarily have the funds to afford today’s inflated market. Read on to find out why prices are so high!

Used Car Lot

Elijah Martin

Used Car Lot

The feeling of the freedom that comes with having your licence is unmatched. Once you pass your driving test you no longer have to text your parents to pick you up or bum rides from friends after school. You have to ability to go anywhere anytime, at whatever speed you like.

However, all of this can only be done if you buy your own car, which recently has been more difficult than ever. If you have looked at used cars for sale anytime in the past couple of months you will have seen that prices have been higher than ever. For example, one of America’s key inflation indexes’, the Consumer Price Index has risen 5% since 2021. Economists believe the used car market is responsible for this rise, as prices for vehicles have not risen this much since 1975.

The cause for the hike in price goes back to COVID-19. During the shut-downs, people were travelling less than ever. So, the need for a vehicle also decreased. This meant that everyone from small families, to rental companies such as Hertz or Enterprise, were not buying new cars, and more importantly, selling off their cars. Due to the decrease in buying and increase in selling, prices actually dropped for cars nationwide, but not for long.

As the social distancing and lock-down procedures began to lift, cars were needed again. Especially for rental companies, who had an absence of new cars on their fleets. But, due to blockages in the supply chain, metal needed for “chips” going into new cars’ computers was missing. So, there was a mass shortage of new cars in dealerships. To account for the missing cars, dealerships turned to the used car market in an attempt to fix their deficit. These big dealerships snatching up used cars from auction or private sale reduced the already dwindling market.

What all of that means for the average car buyer is that there was high demand, but low supply for both used and new cars. With this comes high prices. Prices that peaked car price inflation higher than ever recorded in the modern market.

Used Car Price Index (Car Gurus)

Don’t lose all hope though because GOOD NEWS! Starting in October of 2022, price index has begun to decrease. This does not necessarily mean that prices will be back to what they were before COVID anytime soon, but it is a good sign that it will happen sometime in the future (could be between seven months or two years). Many believe that prices will continue to decrease in the coming months, so if you are in the market for a vehicle now, prices should decrease soon.