Why Used Cars Are So Expensive

What you’ve heard is true—used cars really are getting more expensive.

And it’s not just a few dollar price hike. Used cars saw a 66%-110% price increase from December 2019 to December 2021.¹ For comparison, overall prices have increased ‘only’ 12% from 2019 to 2022.²

Why? Like almost everything over the last two years, it all comes back to the Pandemic.

Here’s the story…

New cars need microchips. That’s where all the computerized magic happens that consumers have come to expect when they drive out the dealership.

But chip manufacturers were hit right between the eyes by the pandemic. They faced extensive lockdowns, followed by surging demand once the economy began to recover. Factories were simply unable to produce new cars. Consumers needed alternatives. So they started buying used cars, en masse.

Demand shot up. Supply went down. And as a result, prices for used cars have soared.

Fortunately, there may be relief on the horizon. If chip manufacturers reopen and new cars hit the market, used car prices should start to trend downward. J.D. Powers estimates the market will stabilize in late 2022 or early 2023.³ Morningstar puts the date in 2023.⁴

But whether those predictions become reality remains to be seen. For now, if you’re in the market for a used car, expect to pay more than you would have just a few years ago.

¹ “When Will Used-Car Prices Drop? 3 Things Car Shoppers Should Know,” Jane Ulitskaya, Cars.com, Feb 3, 2022, https://www.cars.com/articles/when-will-used-car-prices-drop-3-things-car-shoppers-should-know-446525/

² “$1 in 2019 is worth $1.12 today,” in2013dollars.com, https://www.in2013dollars.com/us/inflation/2019?amount=1#:~:text=Core%20inflation%20averaged%203.02%25%20per,2022%2C%20a%20difference%20of%20%240.09

³ “When Will Used-Car Prices Drop? 3 Things Car Shoppers Should Know,” Ulitskaya, Cars.com

⁴ “Used car prices continue to surge. Here’s why — and when they could come back down,” Mike Stunson, Miami Herald, https://www.miamiherald.com/news/nation-world/national/article257060717.html#storylink=cpy

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