But with the new car inventory being so short due to the chip issue, new car prices are rising as well. “So you’ll see used car prices rise and rise, and eventually, they’ll just kind of cap out because they get so close to new car prices that people switch over to buying new cars. “Normally what happens, though, is prices are somewhat capped by new cars,” says Hammer. While this increased demand in used cars should increase the price of cars, it’s hard to believe that cars are becoming appreciating assets. We kind of expected repo rates to spike, but it really hasn’t happened,” says Hammer.Īll the Best Used Cars You Can Buy in 2021 “All of the stimulus money with government, it’s good for consumers, has really kept those cars out of the lanes. Hammer also touches on some of the supply issues as mentioned by Black Book’s analyst. But prices have gone up so much in the market, there’s so much demand for those low-mileage cars, that they’re either getting bought by the customer or getting bought by a dealer before they’re even entering the remarketing channels and have an opportunity to go through the auctions.” But off-lease cars, we have 80 percent of the supply actually flow through our platform, so we have really good insight into what’s going on the off-lease side. President of the auction powerhouse ADESA, John Hammer, explains: “When we think about commercial inventory, the main supply channels for that really come from off-lease, repos, rental fleets, and then just other fleet customers. Repossessions and fleet cars not reentering the market are having a huge effect on the used car price, but again, they’re not the only reasons for the decreased supply. He also explains that available new car inventory is about half of what it was before the pandemic. Available inventory is just dropping fast, every single day,” notes Yurchenko. But what’s happening is that dealers are just selling off their inventory. If you look at May, April, March, they’re healthy 2019 levels-so pre-pandemic. “Because of the chip shortage, there’s a shortage of new inventory. We have elevated demand and short supply,” explains Alex Yurchenko, senior vice president of data science for Black Book. “Well, it’s economy 101, supply and demand. Used car prices have climbed to unheard of levels, in some cases surpassing the vehicle’s original MSRP, which has effectively turned vehicles into an appreciating asset. If you’ve been shopping for a used car lately, you’ve probably been knocked into the Twilight Zone.
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