The last two years have been a bit crazy for used car dealerships across the country. Even as the production of new vehicles is increasing, used cars are not seeing the price drop that some people expected. The demand for these pre-owned vehicles may be dropping, but the prices for said vehicles are not.
How Did We Get Here?
The COVID-19 pandemic put a major wrench in the auto industry. It started with vehicle producers stopping production while consumers were following stay-at-home orders. While it’s reasonable to expect the demand for cars to drop during a pandemic, the opposite was actually true.
People who normally relied on public transportation moved towards owning a car to avoid crowded spaces. Others moved away from dense populations to areas where owning a car is necessary for everyday life. This led to a huge demand for vehicles.
On top of the increase in interest in new cars, there was also a semiconductor shortage. Without these computer chips, auto producers couldn’t complete units. The delay in new cars for sale meant shoppers went after used cars. With high demand and a limited supply, prices go up. In some cases, car dealerships had used cars for sale at higher prices than brand new versions of the same cars.
To help build up their inventories, car dealerships have been paying top dollar for trade-ins and buying practically everything they could get their hands on. With a little bit of work, a dealer could flip a used car and make a nice profit.
Demand Remits
After all of the competition for new and used cars over the past two years, we’re finally starting to see some elements of the market move towards balance. In March 2022, used car dealerships saw a drop in sales compared to the same time last year. Cars that are less than ten years old saw a reduction of 27%, while three-year-old car sales dropped by 31%.
It seems that shoppers are taking more time to finalize their purchases from used car dealerships. The frenzy of buying something right now seems to be ending. With consumers taking more time to find and buy a used car, car dealerships are starting to build up their inventories to pre-pandemic levels.
Prices Are Staying Still
Typically, if demand for a product drops, the price will follow suit. Of course, this is the case when there is a strong inventory of the product. While the stock of used cars is increasing, there still aren’t the numbers necessary to see a drop in prices.
Even with all of the work car dealerships put in to buy used cars combined with the ramped-up production of new cars, dealerships are still sitting fairly empty. Dealers are simply holding prices.
The good news is that it’s still an advantageous time to sell a used car to car dealerships. They are still offering top-dollar. Most people seem to think that things will return to pre-pandemic normalcy towards the end of this year. Of course, only time will tell when we might see prices balance out across used cars.
This post may contain affiliate links. Meaning a commission is given should you decide to make a purchase through these links, at no cost to you. All products shown are researched and tested to give an accurate review for you.
