Gephardt: Low Inventory Leads To Sticker Shock For Used Car Shoppers In Utah
MILLCREEK, Utah – If you have driven past used car dealers in the area you may have noticed the bizarre sight of mostly empty car lots. A shortage in new car production has trickled down to the used car market, and that has pushed prices into overdrive.
Business is busy at CU Auto Sales. Mike Hanson, one of the partners, said the last several months have been their best in years. The trouble is these days, they cannot fill their lot with cars.
“As you drive around it used car lots all over the place, and new car lots, we all have that same problem. We can’t put product on our lot,” Hanson explained. “Completely different than anything I’ve seen before.”
The demand is there, said Hanson.
“We got stimulus money in our pockets,” he said. “We haven’t been doing much – have been cooped up, so a vehicle is a nice thing to change.”
But the supply is not.
A shortage in microchips has slowed new car production to a crawl and pushed buyers to buy used instead. Fewer new cars mean fewer trade-ins. Rental car companies cannot buy new cars fast enough, so they are not selling off their inventory either. All these factors plus increased demand have pushed prices through the roof.
“Retail prices are at record levels,” said Emelie Voss of Carfax. She shared pricing numbers with the KSL Investigators.
A typical used car that sold for just under $17,990 last year now sells for $23,990 – a 25% percent jump. The rise is even higher for used pickup trucks which saw their value climb from $26,390 in May 2020 to $38,000 in May 2021.
“So, truck prices are up about 44% over where they were this same time last year, which is really just an unprecedented increase,” said Voss.
Hanson said indeed, trucks are his fastest movers at CU Auto Sales but prices for every kind of car are in high gear.
“We’ve watched this rapid acceleration of pricing,” he said. “Keep thinking that there’s going to be some kind of a plateau to it, but it just continues to go up.”
For consumers, the higher prices and limited options might make this a less-than-ideal time to buy a used car but there is a bright spot. If you have an extra car to sell or trade-in, dealers are motivated to buy.
“It is a great time to sell that vehicle,” said Voss.
Even with a shortage, most dealers are passing on high mileage cars older than ten years.
“Those are the cars that are really difficult for us to still try to move,” said Hanson. “Those values have not changed much.”
With a microchip shortage going, the higher prices across the industry will not come down until assembly lines ramp up and start getting new cars onto dealer lots.
“So, it’s not clear how long exactly these market conditions will last,” said Voss. “But we’re predicting at least through the summer months.”