Why Are Used Car Prices Going Up?

According to the consumer price index statistics released by the US Department of Labor  2021. CPI in the whole market increased by 5% over the same period last year. The fastest increase since the economic crisis in 2008. Especially, In the used car market 2021. The price of used cars in the US market increased 30% in the past year. Why are used car prices going up? A question to ask in the article is “Why Are Used Car Prices Going Up”. 

How Much have Used Car Prices Gone up?

At a 30% increase in 2021. Do you think the used car costs have peaked or whether they will keep climbing in 2022? It will hurt you when you hear the news that: “Used car prices will continue to increase well in 2022” officials and economists said. According to the data we got, CPI for used cars increased by 40.5% from January 2021 to January 2022.

Specifically, the price of used cars in the US increased the most in the popular, low-priced cars, with an increase of 20% to 40%. While the price of sports cars, supercars, and used luxury cars increased slightly.

In the report from CarGurus, used car prices in the US have increased sharply with an average of up to 30% by brand. With the average used car costing almost $7,000 more than it would in 2020. Here are some car brands with the biggest increase in used car prices in the past year:

  • Ford: 38,93%
  • Chevrolet: 37,47%
  • Volkswagen: 35,13%
  • Toyota: 30,54%
  • Kia: 30,03%

It can be seen that the popular, lower-priced models tend to increase sharply in the used car market compared to sports cars or supercars.

used car price trends
Used car price trends are forecast to increase slightly in 2022 (Photo: autoportal.com)

Why are Used Car Prices Going up?

Covid-19 impacts

The covid-19 epidemic is temporarily under control. But the production activities of many auto factories are interrupted. Causing the supply of new cars to be in short supply. Used cars are therefore increasingly scarce and sought after in the used car market. 

Used car prices in the US began to increase when consumers in the US began to receive Covid-19 subsidies from the government. After that, the Covid-19 vaccination program was replicated. And the fact that people started going back to work after isolation made the price of used cars in this market increase sharply. But it is just not the only reason used car prices increase. Let’s find out the next reason

Chip Semiconductors Shortage

Car manufacturers are facing significant microchip shortages globally. This shortfall is due to a surge in demand for computers and other electronics during the COVID-19 pandemic, outpacing the current supply of semiconductors. The problem of global chip shortages began in 2020 after many countries imposed complete lockdowns. Affects production and supply cycles. Global semiconductor supply bottlenecks especially affect the performance of car manufacturers and make the new car supply scarce. It’s one of the reasons foster customers choose used cars.

With the pressure of demand rising but supply still the same, the conundrum of global chip shortages could continue into next year, with some improvement to be seen from mid-2022 onwards… Several major chip makers in the US and Europe are expanding production capacity, which could aid the auto industry’s recovery from the middle of 2022.

Chip Semiconductors Shortage
Chip Semiconductors Shortage is the most important reason effect to car prices. (Photo: pinterest.com)

High-price for new cars

Due to chip shortage, the costs to manufacture new vehicles increase dramatically. And what we’re seeing is the supply of new cars is still really short and there’s no sign that it’s going to improve any time soon. Therefore, the demand for used cars will skyrocket because used cars will be the only “affordable” price car for many customers. Mid-size and compact cars are the most perfect option that many people choose in the last year. 

Gas prices

The average gas price in the US rose to more than $4 a gallon in March 2022, as the Ukraine invasion led to an all-time high for gas prices. We are also wondering Whether the gas price elevated, can affect the used car market and the car choice. Many people will choose electric vehicles over gas cars?

Good news: Until now, there is no official data yet to signal a decline in demand for the used car market. We think all cars are in great need regardless of the kind of gas or electricity. We all see the reality that: due to the pandemic, consumers changed from public transportation to driving a car because they will feel safer. It’s one of the reasons why are used car prices going up.

Should I Buy a Used Car in 2022?

From the information above, we all know that it’s not a good time to buy a car at this time regardless of a new car or a used car. Although the car supply has been forecasted that there will be signs of prosperity in 2022, the used car prices will be hard to dramatically decrease. Used car values won’t suddenly decrease and will never fall back to 2019 prices. But there will be a light at the end of the tunnel: Once the production recovers, the supply and demand for used cars will begin to balance. Economists said that used prices will eventually begin to drop in the second half of 2022.

Some tips for buying used cars

As we all know, a car is not an asset that when the value decreases – like stocks, for example. We decided to buy them because of their necessity for us, not as a speculative investment. 

If now you have a limited budget, used cars are a good option for you. Although their prices at that time have much higher compared to past years, they still cost less money on used cars than a new car. So buying a car is an important decision and you should consider it carefully before deciding, especially at this time. To have a high-quality car at a good price, please take a look tip we share below: 

used car cost
Should I buy a used car in 2022 (Photo: pinterest.com)

Identify your budget

Before investing in a used car, you should carefully calculate how much money you can spend on a car. This amount includes registration, insurance, and routine maintenance costs.

Pre-inspection before purchasing.

Overall inspection of the outside and inside of the car is a really significant step. This helps to identify the condition of cars including the paintwork, signs of collision, or whether the owner is taking care of the car. A car with original paintwork, with no scuffs or minor scratches, means it’s been used with care and is virtually collision-free. Besides, you need to check the other important parts of cars such as tires, engine and their furniture.

  • Check the condition of the tires: The slots on the tire will be shallower if worn a lot. Showing that the car owner does not check and take care of the car regularly. Are the tires on the axle? If when the vehicle is stationary, the front and rear axles are not aligned, the vehicle has been affected by the chassis due to a strong impact affecting the vehicle structure.
  • Inspect the engine: Open the engine compartment and observe and check the condition of the car’s water tank, and engine oil. Does the water tank have enough cooling water?
  • Furniture: Need to carefully observe every detail in the car including the door, gear lever, car interior leather, seats

>> Related post: Pre Purchase Inspection: What, Where, and How Much?

Find the trusted supply

The place where you decide to buy a used car will have a great effect on the prices you must pay and the buying process. In the situation: the car supply is very scarce. It’s easy to happen that sellers will lift the price not properly. You can control the origin of the car, the quality, the mileage, etc. At the same time, buying a car from trusted sellers can save you time in completing the procedures and paperwork.

Final Thoughts

If you have a plan to buy a used car in 2022, we think the topic “ Why are used car prices going up” will be helpful for you. But please note that all opinions are for reference only, the final decision maker will still be you. So equip yourself with what you need to know when deciding to purchase a used car model.