Could used car prices be shifting downward?
BIRMINGHAM, Ala. (WBRC) - If you’re looking to buy a used car soon, be prepared to pay more for it.
Analysts said used car prices are at a record high, and experts are pointing to the microchip shortage and high demand as the reason why.
Experts said those in the market for a used car will have to keep an open mind because not only are pre-owned vehicles more expensive, inventory is also low.
Experts say the listing prices for used cars rose 40% in January, compared to the same time last year.
UAB Assistant Economics Professor, Dr. Ben Meadows, said it’s all because of COVID.
Car makers were concerned the pandemic would cause a recession decreasing the need for new car purchases.
“So, one of the things they did was to scale back on orders of chips, which is an integral part of our very computerized cars now,” Dr. Meadows said.
But Dr. Meadows said demand for cars didn’t dip as expected, putting car manufactures in a bind.
More people started working from home, so the need for electronic devices skyrocketed, and car makers were forced to the back of the line to put in new microchip orders.
“And what you ended up seeing was that even a car that was two or three years old would be going or listed for the same MSRP as a new one. There was the confluence of two things: limited supply of new cars and increased demand for cars, or maybe better put, demand had never changed for cars,” Dr. Meadows explained.
Dr. Meadows said since there was such a shock in the new car market, it rippled into the used car market, driving up the price of pre-owned vehicles.
But the owner of Benton Nissan said there are signs the high price of used cars is shifting downward saying the price of used cars is getting back in line with book value.
“Probably in the middle of January we started to see the prices of the vehicles we were out buying, and those prices were going down in the middle of January and starting in February we’re seeing another decline in actual prices. So, 21 was something we’ve never seen before, but it seems like as everything is calming down, COVID’s calming down, that we’re seeing the prices of used cars and demand go down, which is good,” said Dale Benton.
Experts said it might be hard to negotiate the price of a used car, but suggests using a vehicle history report as a bargaining chip to help you get a more reasonable price.
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