Used car prices have skyrocketed 42 percent since the start of the pandemic.
The average price of a used car in the United States is now $29,011 and experts are agreeing that the prices are unlikely to come down in the foreseeable future.
Much of the inflation comes from auto plants suspending operations at the start of the pandemic to attempt to slow the spread. As people were also staying home and purchasing new laptops and televisions, semiconductor producers also shifted focus from cars to consumer electronics.
The Associated Press reports that “for the first time that anyone can recall, more than half of America’s households have less income than is considered necessary to buy the average-priced used vehicle.”
“When a swifter-than-expected economic rebound boosted demand for vehicles, auto plants tried to restore full production. But chip makers couldn’t respond fast enough. And rental car companies and other fleet buyers, unable to acquire new vehicles, stopped off-loading older ones, thereby compounding the shortage of used vehicles,” the report explains.
It’s not just used cars that are soaring in price. New vehicles now average close to $46,000, according to car sale website Edmunds.com.
“Since the pandemic started, used vehicle prices have jumped 42% — more than double the increase for new ones. Last month, the average used vehicle price was 63% of the average new vehicle cost. Before the pandemic, it was 54%,” the AP report explains. “Including taxes, fees, a 10% down payment, and an interest rate of around 7.5%, the average used vehicle now costs $520 a month, even when financed for the average of nearly six years, Edmunds calculated.”
According to Ivan Drury, a senior manager at Edmunds, the average car payment was $382 five years ago and $413 two years ago. The current average used car payment of $520 is approximately the cost of a new car payment in 2017.
There are currently about one million new cars for sale in the United States, which is about one-third of the normal amount. Prices are expected to remain sky high until the stock goes back up to between two and 2.5 million — which may not be until “well into” 2023 or even 2024, the AP report says.