Car prices seem to have gone through the roof!
If you’ve been looking for a used car any time in the recent past, you know that prices have been through the roof. The combination of high demand and low inventory have propelled prices past all logic and even made the Blue Book blush with used cars suddenly appreciating beyond their prices even just a couple years ago. A new report from Cox Automotive, though, suggests that we may finally be at a tipping point.
Demand spent much of the 2020s so far elevated largely due to the pandemic, reports suggest. With customers actually able to get back onto used car lots—which were as closed as nearly any other business was back during the lockdowns—they were able to satisfy that pent-up demand. Demand also climbed by virtue of the fact that no one was especially interested in taking public transportation when the public might possibly have been carrying a potentially deadly virus.
However, the latest word from Cox Automotive suggests that a pricing peak, based on used car auction performance, has already arrived. If this proves true going forward, we should start seeing prices decline and inventories increase. The Cox Automotive data for June so far has been showing prices at wholesale auto auctions decline. This pricing data is still well above normal levels, reports note, but compared to the month of April, they’re down 14%. Wholesale values were actually 50% above normal in April, but by mid-June, that premium value had dropped to 36% above normal.
This may have some impact, but reports also suggest that the chip shortage plaguing the new car market—along with several other issues of electronics manufacture—is still in play, and may continue to be for much of the rest of 2021. There’s also a lag to consider in the time between wholesale auto auctions and the produce of those auctions hitting used car lots. Thus, Cox Automotive industry analyst Zo Rahim projects that prices will continue to be high for “a few more weeks” before prices begin a decline.
Though prices may come down from their peak, used car dealers are still expecting demand to be brisk. CarMax has reportedly set out to hire 5,000 new sales professionals this summer in a bid to address that elevated demand. Consumers are sitting on savings realized from the last year or so, Rahim also noted, and this makes for a potentially brisk car buying season to come.
by Steve Anderson – Content Creator for Half Full Marketing
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