As of February, the average price of a used car was $26,068. While this is down from last year’s record of over $28,000, it’s still a drastic increase from the average pre-pandemic price of $22,000.
Although the pandemic has now subsided, used car prices remain stubbornly high. Unfortunately, insiders maintain these prices are unlikely to return to pre-pandemic levels anytime soon.
What’s Going On?
During the pandemic, many automakers shut factories down for weeks, if not months, on end. These shutdowns were further impeded by an ongoing semiconductor chip shortage, which made it even more difficult for automakers to get new cars on the lot. Together, these factors had a significant impact on vehicle production.
Since there were fewer new cars produced during the pandemic, there are now fewer used cars on the secondary market. The result of these lower inventory levels, coupled with steady demand for used cars, means that prices have increased across the board.
Used vehicle inventory is still down 26% from pre-pandemic levels. For consumers, this means that buying a used car may continue to be a major expense for the foreseeable future.
One impetus for a drop in car prices would be if automakers produce more new cars, meaning there would eventually be more used cars. While analysts do expect automakers to increase production this year, manufacturers enjoy larger profits when there are fewer vehicles, therefore it’s not necessarily in their best interest to overbuild.
Even if auto production did reach normal levels, it would take years for those new cars to hit the secondary market. Cox Automotive predicts used car prices won’t reach pre-pandemic levels until 2026 at the earliest.
For now, consumers with reliable transportation may want to consider servicing their vehicles frequently to ensure they last as long as possible. And, for those in the market, be prepared for sticker shock, even when checking out older used vehicles.
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