Why Used Car Prices Are Soaring & When They’ll Drop
If you’ve noticed that used car prices are skyrocketing lately, you’re not alone. Many people, including friends and family, have been reaching out wondering whether they should sell their cars now or hold onto them. In this post, we’ll dive deep into why used car prices have exploded, when we might see a cooldown in the market, and how you can potentially snag deals despite the crazy prices.
Like most markets, the price of used cars boils down to supply and demand. Right now, the demand for used cars is much higher than the supply, pushing prices upwards. But why exactly is supply so low?
The biggest culprit behind the shortage of used cars is a global chip shortage. Modern cars rely heavily on microchips to operate everything from the engine to the infotainment system. When chip production falters, so does car production.
This shortage has caused new car inventories to plummet. For example, in the U.S., new car inventory dropped by 54% in June compared to the previous year. Since fewer new cars are available, many buyers who would typically buy new cars are now turning to used cars instead.
Another factor contributing to the low supply of used cars is that people are keeping their current vehicles longer. Because new cars are expensive and hard to find, many drivers postpone upgrading their vehicles. This means fewer trade-ins and less turnover in the used car market, further driving up prices.
Used car prices bottomed out after the 2008 recession and again briefly in early 2020. Since then, prices have nearly doubled in just about a year and a half. On average, used car transaction prices have surged by about $6,000 between January 2020 and June 2021.
The gap between new and used car prices has narrowed dramatically. In some cases, used cars are nearly as expensive as new ones, which is unusual and signals a potential market imbalance.
In May and June 2021, wholesale auction prices for used cars started to flatten and even decline slightly. This is a key indicator that retail prices might soon follow suit.
Experts suggest holding off on buying a used car for 6 to 12 months, as supply issues and the chip shortage are unlikely to resolve quickly. Realistically, prices might not stabilize until 2022 or later.
Even with soaring prices, used car sales are expected to hit record levels this year. Dealerships are profiting handsomely as long as they can keep sourcing inventory.
If you own a car that’s worth more now than when you bought it, it might be a smart move to sell, especially if you don’t urgently need another vehicle. One example is a friend who works from home and sold his car, saving money on insurance, fuel, and maintenance.
If you’re in no rush, waiting is often the best strategy. Prices are sky-high, and buying now could mean overpaying. Waiting until supply improves could save you thousands.
If you must buy now, niche car forums and enthusiast groups can be goldmines for good deals. Cars with a passionate following—like Land Cruisers, stick-shift vehicles, or air-cooled Porsches—often have tight communities where owners may sell at reasonable prices.
Websites like Craigslist and Facebook Marketplace can offer hidden gems, but you’ll need to sift through plenty of listings. Sometimes sellers don’t realize the market value of their cars, which can work in your favor.
Having flipped cars with my dad for years, I’ve learned that timing and finding the right car are everything. Right now, the market is unusual, and traditional buying strategies don’t always work. Patience and research are your best friends.
If you’re thinking about investing in collectible or desirable vehicles, focus on tight-knit communities where you can learn about the true value and demand.
The chip shortage and supply crunch aren’t going anywhere soon, but we’re starting to see early signs of stabilization. By late 2021 or early 2022, prices may begin to level off or even dip.
Dealerships will continue to make money while inventories last, but buyers should remain cautious.
Used car prices are at historic highs due to a perfect storm of supply shortages and increased demand. If you can sell and profit, now might be your moment. If you’re buying, patience and thorough research can save you from overpaying.
Keep an eye on wholesale auction prices and market reports to spot when the bubble might finally burst.
A shortage of microchips has severely limited new car production, pushing more buyers into the used car market while fewer people trade in their vehicles.
Most experts expect prices to stabilize or fall by late 2021 or sometime in 2022, once supply chain issues improve.
If you can make a profit and don’t urgently need a replacement, selling now is a good move. Otherwise, waiting may be better.
Look for niche car forums and enthusiast communities, as well as online marketplaces like Craigslist and Facebook Marketplace.
Thanks for reading! If you found this helpful, follow me on social media for more money and car market insights. Here’s to making smart moves and building wealth—even in a crazy market!
Introduction: Mastering Your Money for a House Down Payment Saving for a house is one…
Short Selling Stocks Explained: How to Profit When Prices Drop If you’ve ever heard the…
Pay Off Debt or Invest First? 4 Questions to Decide When it comes to personal…
Investing your money wisely is one of the best ways to build wealth over time,…
Buying a car is one of the most significant expenses most of us will face,…
Why Credit Cards Aren’t That Bad: Busting Dave Ramsey’s Myth If you’ve ever dived into…