It has been more than a year since the pandemic hit and not only shook our lives but also the economy. As you might or might not know, a lot of industries were badly affected by it. Including our beloved car industry. Car prices are at an all-time high and not only are the prices of new cars high, but also the prices of used cars. These cars have high prices because of a reason. Of course, the pandemic is behind it. Dealerships are running extremely thin on the supply of cars and the entire situation regarding the supply and demand chain of cars has been the worst in quite a long, long time.
You might have been saving up for a new car. Or perhaps you might have wanted that used Volkswagen Golf for sale. However, you might be surprised at the cutthroat prices of both the new and used car prices. For the uninitiated, the prices of used cars are at a record-breaking high of $26,457 the last month, according to Edmunds.com. Not only that, new car transaction pricing is also at an all-time high south of $40,000. This hasn’t been the case ever. An all-time high case, the market is extremely expensive right now.
The car market is running quite thin. Dealers are not being able to get their hands on the supply of cars. Vehicles are coming into the lot and easily being sold out as soon as they hit the shelves. But why is this the case? Why is this happening in the first place? Well, of course, because the production of cars is not at the same pace as it was a couple of years ago.
You see, when the pandemic hit, the market became volatile. There was and there still is a worldwide semiconductor shortage and that has not been resolved yet. As a result, there are a lot of crises in electronics all around the world. Semiconductors are required to make chips and chips are used to make electronics. Without it, the world would not be the world we know it today.
However, since the shortage hit, the demand for electronics rose significantly. People were forced to work from home, and that necessitated the purchase of computers, laptops, and smartphones. The demand kept on rising but the supply just couldn’t. As a result, the car industry was also hit badly. Why? Because without electronics, you can’t construct a car in the 21st century. This is why, the supply of cars is also very low but the demand keeps on rising.
Why are the prices high? Well, for the new cars, the prices are high because the demand is high and the supply is low. When the supply is low and demand is high, that means that the pricing will go through the roof. The prices of used cars are high because people are now looking to buy used cars since new cars are too expensive. Last year, car rental companies sold their entire fleet because they needed to survive the pandemic.
But now, since the restrictions have been lifted, people are going out more than ever and the car rental companies are trying to purchase the used cars back. Also, with the restrictions being lifted, there are more and more people going out. They are trying to avoid public transportation and they are also trying to avoid congested places. Most people require a personal car. Also, this is another major reason that is putting pressure on the market.
All of these factors combined are making the market more expensive than ever. Everyone wants a used car and hence, the prices are shooting up. Perhaps, if the supply of new cars stabilizes, that can alleviate the ridiculous pricing but if not, then the prices will only continue to rise. Dealerships are having the lowest inventories ever, and even when they do receive vehicles, they are being sold out at a breakneck pace.
The whole point is that people are not backing down from making purchases. Even if the prices are at an all-time high, people still need cars. Everyone needs a car, especially with the current situation. Everyone is trying to maintain social distancing and wants to avoid public transportation. Of course, all of this puts massive pressure on the supply chain and it inevitably gets expensive. Also, other factors such as cheap financing and high trade-in values also make it even more convenient for people to buy a new or used car.
CarMax is the largest seller of used vehicles in the US. They also have bought about 236% more cars from their customers this year than they did last year. That is an insane amount. They have the biggest inventory in the entire country right now, at 40,000 vehicles. But despite that, they say that they are still 10,000 vehicles down from last year.
Inventories in dealerships are also at an all-time low. As soon as a car enters the dealership, it is sold. However, when it comes to used, even cars that have more than 100,000 miles in them are being sold at an average of $16,489. It was just $12,626 last year. At this odometer reading, pickup trucks are the most expensive. They are the most valuable among the lot. Chevy’s Silverado 1500 and Ford’s F-150 are the two vehicles that shot up by a massive 49% and 43% in pricing from last year.
Dealers are also holding auctions to fill up their used car lots. Used car dealers are also finding themselves in a tough spot with low inventories. That’s why, they are having to turn to auctions in order to replenish their inventories. Yes, the situation is pretty precarious. Even the auctioneers are also having a fraction of the inventories that they were enjoying a couple of years ago.
So, with everything going on, it is not unusual that the pricing of the cars is high. But what is even more astonishing is that it is not keeping buyers away. Even though the prices of used and new cars are at an all-time high, people are still finding ways to get their hands on a car, whether used or new. We simply don’t know when this madness will end, and when prices will finally be settled.