Used car prices are so high right now. In fact, prices are getting to the point where manufacturers are thinking about whether to raise regular sale prices on new vehicles.
But why is this happening?
Various factors are coming into play. For starters, supply problems mean that it is much more difficult to get hold of new cars than it was in the past. Firms are still dealing with a backlog of orders and trying to shift stock that didn’t budge during the height of the lockdowns.
The other reason directly concerns consumer buying behavior during the lockdown. With so many people spending time at home instead of at their regular jobs, (and with more disposable income in their pockets), the market for second-hand vehicles took off. Everyone wanted one, it seemed.
These two factors together conspired to cause second-hand car prices to soar. But will it last?
Well, according to White House predictions, it won’t. Supply bottlenecks (and inflation), it says, are temporary, and we’re heading back to baseline soon. In fact, we may actually get there in the next couple of months.
For this reason, demand for second-hand vehicles is already falling. Motorists are anticipating lower prices in the future so they’re putting off purchases – it’s deflation in action. In fact, this behavior is leading to changes in prices already. Another major global lockdown looks like it is off the cards, and so the market is returning to normality. Omicron doesn’t appear to be wreaking the same level of havoc as Delta before it.
For companies like Cars Protection Plus, this is good news. It means that more consumers will be buying second-hand cars in the coming months and, therefore, taking out after-market warranties on them.
New Cars Out Of Reach
Over the past 18 months, many people would have liked to buy a new car at the regular retail price. But due to factory closures, mainly in the Far East, production hasn’t been as high, and most inventories sold out quickly. The only option for many of these owners was to scour the second-hand market for nearly-new models, pushing up prices at breakneck speed. Sellers suddenly realized that they could cash in on the trend, making more money for themselves and their families.
During the pandemic, people also avoided using public transportation. Due to the risk of infection, individuals sought alternative means of getting around. Buying a car suddenly seemed to make a lot more sense, particularly when the severity of the disease was largely unknown.
Price Drops Expected
At the end of 2021, though, prices are expected to fall. There’s a short window of time during the last quarter where cars appear one year older in calendar terms than they actually are, because of the arrival of the following year’s models. Now that factory production is getting back to pre-pandemic levels, automakers are able to churn out the normal quantity of cars, restoring downward pressure on the second-hand and used car markets.
So, for buyers out there, the waiting is probably over.