According to Cox Automotive industry analyst Zo Rahim, the wholesale market where dealers buy and sell in bulk has already reached its peak and the prices of used cars should begin to fall soon. There were many reasons for this pandemic used car price increase and the rising second-hand car prices helped push inflation to a decade high in America. The prices of used cars and trucks rose 10 percent in April and 7.3 percent in May which accounted for around a thirty percent increase in the consumer price index. Federal Reserve believes that rising inflation is largely transitory with the economy reopening and wholesale prices are at their peak and should start to go down. There has been a slowdown in prices in the first two weeks of June, compared to an absolute increase. Individual car prices generally follow the wholesale market, but with lag. This means a few more weeks of retail price increases before they start declining. The Manheim wholesale used car price index was 36 percent higher than in mid-June of the previous year. One effect of higher prices is an increase in the average life expectancy of vehicles in the United States. Auto dealers expect strong demand to continue and auto dealers are hiring automotive professionals this summer and offering training to mobilize workers from other industries. There are many reasons for the increase in used car prices. Some are unique to the auto industry and others are influencing the entire economy. American household incomes actually increased overall during the pandemic, as government aid and benefits outpaced lost wages. And since the lockdown has limited spending opportunities, a lot of money was saved than usual. Hence, potential customers have been accumulating a lot of savings in the past year, which is preferably spent on long-lasting assets such as cars. Automobile factories around the world were closed down during the most severe phase of the pandemic. When they tried to get back into production, a new problem emerged: a shortage of semiconductors, key components of car touch screens, and other functions like power steering. This had a huge impact on the used car market in the United States. With a low supply of new vehicles, many buyers are turning to second-hand vehicles. Car rental companies formed a major part of those buyers. They usually fill their fleet with new cars, but after they sold some part of their fleet in the early days of the pandemic when demand for travel waned, they were forced to buy secondhand cars due to the inadequate supply of new cars. This contributed to the surge in demand for used vehicles, where they would normally be adding to supply by selling their older vehicles. Along with having more savings to spend on buying a car, many Americans did not wish to travel with other kinds of transportation during the pandemic, making cars even more essential to millions of families.
Is the used car price increase peaking?
According to Cox Automotive industry analyst Zo Rahim, the wholesale market where dealers buy and sell in bulk has already reached its peak and the prices of used cars should begin to fall soon. There were many reasons for this pandemic used car price increase and the rising second-hand car prices helped push inflation to a decade high in America. The prices of used cars and trucks rose 10 percent in April and 7.3 percent in May which accounted for around a thirty percent increase in the consumer price index. Federal Reserve believes that rising inflation is largely transitory with the economy reopening and wholesale prices are at their peak and should start to go down. There has been a slowdown in prices in the first two weeks of June, compared to an absolute increase. Individual car prices generally follow the wholesale market, but with lag. This means a few more weeks of retail price increases before they start declining. The Manheim wholesale used car price index was 36 percent higher than in mid-June of the previous year. One effect of higher prices is an increase in the average life expectancy of vehicles in the United States. Auto dealers expect strong demand to continue and auto dealers are hiring automotive professionals this summer and offering training to mobilize workers from other industries. There are many reasons for the increase in used car prices. Some are unique to the auto industry and others are influencing the entire economy. American household incomes actually increased overall during the pandemic, as government aid and benefits outpaced lost wages. And since the lockdown has limited spending opportunities, a lot of money was saved than usual. Hence, potential customers have been accumulating a lot of savings in the past year, which is preferably spent on long-lasting assets such as cars. Automobile factories around the world were closed down during the most severe phase of the pandemic. When they tried to get back into production, a new problem emerged: a shortage of semiconductors, key components of car touch screens, and other functions like power steering. This had a huge impact on the used car market in the United States. With a low supply of new vehicles, many buyers are turning to second-hand vehicles. Car rental companies formed a major part of those buyers. They usually fill their fleet with new cars, but after they sold some part of their fleet in the early days of the pandemic when demand for travel waned, they were forced to buy secondhand cars due to the inadequate supply of new cars. This contributed to the surge in demand for used vehicles, where they would normally be adding to supply by selling their older vehicles. Along with having more savings to spend on buying a car, many Americans did not wish to travel with other kinds of transportation during the pandemic, making cars even more essential to millions of families.