Used-car prices jumped dramatically in June over the previous year, helping to drive an overall increase in the nation's inflation rate, according to the U.S. Bureau of Labor Statistics,
Used-car prices have been rising since they first crossed the $20,000 mark at the end of June last year and averaged $25,101 this past June, Kelley Blue Book reported. American customers bought 12% fewer used cars this past June when compared with June 2020. In July, the supply of used cars on dealership lots was about 2.45 million vehicles.
"In June, used cars and trucks showed both the biggest year-over-year, as well as month-over-month gain across all categories," Nick Woolard, an analyst at TrueCar, told Consumer Reports.
Although used-car prices are increasing faster than new-car prices, experts say the spike is a double-edged sword. Dealers are trying to snap up as many used cars as they can to satisfy customer demand, and that means that car owners can get top dollar if they are looking to sell or trade in their vehicles. Dealers are most interested in finding cars under two years old, and the three- to five-year range is the second most sought after.
That means that Oregon dealerships, such as Power Auto Group, has to negotiate for cars and be creative in how they get them and at what price. Power Auto Group -- with stores located in Sublimity, Salem, Corvallis, Newport and Lincoln City -- carries 12 vehicle lines, including Chevrolet, GMC, Buick, Mazda, Honda, Kia, Ford, Lincoln, Chrysler, Dodge, Jeep, and Volkswagen, as well as four motorcycle lines -- Yamaha, Kawasaki, KTM and CAN-AM. They also have a wide selection of preowned vehicles.
Power Auto Group, like most American dealerships, has fallen victim to the microchip shortage. Microprocessors are important in new-car productions, and many chip-producing centers worldwide were shut down due to COVID-19 issues. That translated to many fewer new automobiles being produced, which yielded fewer cars on car lots nationwide.
As demand for new cars grew and supplies became exhausted, used cars became the vehicle of choice for many, and dealerships have been hard-pressed to meet demand. That has caused bidding wars for used vehicles to such an extent that sometimes used vehicles are selling for more than the MSRP.
Bidding for cars has also become more volatile as repossessions, rental cars and fleet cars are not hitting the market as usual. According to John Hammer, president of car auction leader ADESA, “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," he told Autoweek. "However, off-lease cars, we have 80% of the supply actually flow through our platform, so we have good insight into what’s going on the off-lease side. 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.”
This narrowing pipeline for inventory is making the dealers work harder for their cars, but customers seem to be buying them as soon as they hit the car lots.
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