Could used car prices drop?
BIRMINGHAM, Ala. (WBRC) – If you’re looking to buy a used car soon, be prepared to pay more.
Analysts said used car prices were at an all-time high, and experts point to microchip shortages and high demand as the reason.
Experts said those looking for a used car will need to keep an open mind, as not only are used vehicles more expensive, but inventory is also low.
Experts say used car listing prices rose 40% in January, compared to the same period last year.
UAB Assistant Professor of Economics Dr. Ben Meadows said it was all down to COVID.
Automakers feared the pandemic would cause a recession reducing the need to buy new cars.
“So one of the things they did was reduce the chip controls, which are now an integral part of our highly computerized cars,” Dr Meadows said.
But Dr Meadows said demand for cars has not fallen as expected, putting automakers in a bind.
As more people started working from home, the need for electronics skyrocketed and automakers were forced to stay in line to place new orders for microchips.
“And what you ended up seeing was that even a car that was two or three years old would be sold or listed for the same MSRP as a new one. There was a confluence of two things: a limited supply of cars new cars and increased demand for cars, or perhaps better, demand had never changed for cars,” Dr Meadows explained.
Dr Meadows said that since there was such a shock in the new car market, it trickled down to the used car market, driving up the price of used vehicles.
But the owner of Benton Nissan said there were signs the high price of used cars was coming down, indicating used car prices were coming back in line with book value.
“Probably in mid-January we started to see the prices of the vehicles we were buying, and those prices went down in mid-January and from February we see another real price drop. So 21 was something we haven’t seen before, but it looks like everything is calming down, COVID is calming down, we’re seeing used car prices and demand coming down, which is good,” Dale Benton said. .
Experts say it can be difficult to negotiate the price of a used car, but suggest using a vehicle history report as a bargaining chip to help you get a more reasonable price.
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