The Consumer Price Index shows that the value of used cars and trucks has risen by 21% or more over the last few months. Some reports from other car sites, such as Car Gurus, has stated that the values have risen over 30% over the last year. The value of used cars continues to rise every month, and as issues continue to plague the world, they will continue to do so.
Either way, used car values have gone up because of one reason. The demand has grown to such an elevated level that the dealers are having a tough time keeping up. The lack of supply has caused used dealers to adjust how they do business.
- Workers-The new car industry has been plagued by a lack of workers, just like the rest of the nation. The pandemic has caused a huge shift in the economy, and the workforce. Factories are running with skeleton crews that are overworked. Overtime costs have risen for most major car manufacturers. Overtime expenses can lead to payroll limits being exceeded. As most of you know, high payroll costs eat into profit margins.
- Global Shortage-There is currently a global shortage of computer circuits and components that new cars require. The shortage is linked to the lack of workers. Production lines require people in every station to pump out parts needed to build the circuit boards. No workers mean slower production. Slower production means less products available. This cycle keeps going, and until it levels off there will be no end in sight.
- Layoffs-The lack of workers, and the inability to obtain parts for production, has caused a decrease in sales for the new car and truck industry. Less profits means downsizing and layoffs. The cycle becomes worse because it leaves skeleton crews with even less people to perform all the needed functions. Overworked employees have the tendency to leave the company for which they are working. This will decrease the workforce even more, causing more strain on the people that have stayed. In turn more people will leave, and the process becomes even worse.
- Trade Ins-People have realized that used cars for sale have become expensive. If you have a reliable car, it is not justified for you to trade it in at the moment. Most of the nation feels this way so trade ins have decreased by a substantial amount. The used vehicle business relies on trade ins and wholesale buys. Since people are holding on to their current rigs, the industry has had to rely on outside sources to keep their lots stocked with choices. This flood has caused wholesale prices to increase, and that increase in cost has been passed down to you.
- Lease-People across the nation prefer to lease their vehicles. It allows you to have a car that is in good condition, and when you want to change things up you can turn it in and get something else. The higher costs have decreased the amount of people that are turning in their leased vehicles. This makes even less cars available, which increases the costs even more.
As you can see from above everything connects to each other. It is a huge circle of supply and demand. The current pandemic, and the unavailability of new parts, breaks the circle.
This break has caused an increase in prices of new cars and used as well. As prices continue to rise, the supply will decrease, and the demand will get higher. An increase in demand calls for prices going up. This circle must be broken before the used car industry will be able to lower costs back to normal.
