It’s no secret that used car inventories have been at historic lows and car prices have risen dramatically since the COVID pandemic hit global supply chains. During 2022, we’re seeing record levels of inflation we haven’t seen in decades and the used car market has seen some dramatic impacts. There’s some news that supply chains may be getting better and inventories may be improving, but is now the time to buy or sell a used car?
There’s a lot of factors that go into the car, both new and used, market that affects their prices. On the new car side, there’s complete country-wide lockdowns going on in China that affect so many U.S. suppliers, there’s a chip shortage that new cars require so many of, and there’s record levels of demand due to the healthy balance sheets of consumers. So, put those two items together: manufacturers are struggling to meet demand and consumers have record levels of demand. With economics 101 and a basic understanding of supply and demand, used car prices are elevated and extremely expensive.
Now, let’s go to the other end of the spectrum with used cars. There are some similar factors with the new car market, such as record levels of demand from U.S. consumers with extremely healthy balance sheets bloated with cash. Plus, for those buyers who are forced out of the new car market due to their prices are now going into the used car market to help meet their demand. Thus, forcing even more pressure on that market. Throw in record high national gas prices and the demand for even older used cars that are cheap and fuel-efficient, and you’ve got a recipe for disaster. The chain of struggles starts with new cars and trickles down to used cars.
This all sounds negative, but there is one positive component: sellers can get elevated prices for cars they are trying to get rid of or trading in. Essentially, this is a wash. Sellers can help negate some of the higher prices in a used/new car by trading in their existing vehicle and getting elevated value on it. But does it even out?
My honest opinion is no. I think there are just too many negative components of the used and new car market right now to create any sort of attraction in buying a new vehicle. If you’re in a position where you have a ton of excess cash and upgrading your vehicle is simply a drop in the bucket, then I don’t think this blog necessarily applies to your situation… saving a few thousand on a new vehicle might not be at the top of your mind.
However, if you’re on the fence on upgrading your car and pushing the top of your price range, I would either wait or buy a significantly less expensive car. Prices are way too elevated right now and there doesn’t appear to be good value in the car market. Plus, interest rates have been creeping up this year and that car payment is likely to be significantly more than what you thought it might have been a few months ago.
Any opinions are those of Carson Odom and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.