Here's Why Used Cars Are So Expensive, Right Now.

Long story short: The increased demand for used automobiles, together with a still-recovering supply chain and microchip shortage is why used cars are so expensive right now.

So, what exactly does that mean?

The average prices of used cars rose in every month from February to November in 2021. The surge began years ago, but compounded in 2020 due to the Coronavirus pandemic. The truth of the matter is that used car prices are blowing past record highs on a regular basis as the new car shortage diverts buyers to what they deem as their only option. It's pretty frustrating for so many people right now.

Microchip Shortage Affecting Surge

A worldwide shortage of microchips for new vehicles has pushed prices up for the new cars, which in turn has affected the market for used cars.

First of all, what exactly is a microchip (aka chip), and more specifically the semiconductor chip, and why is it so important to the automotive industry?

The microchip is the brain of modern electronics. Even the simplest car can employ a dozen or more chips in everything from antilock braking systems and engine computers to in-dash displays. Unfortunately, virtually all other electronic products also use these chips, and suppliers were overtaxed, primarily due to the pandemic. With people staying home — and, notably, working and schooling from home — demand exploded for computers and other consumer electronics. Companies that produce these items contracted with chip suppliers during the initial wave of COVID-19 when car sales decreased. However, when car sales rebounded, chip manufacturing capacity had been snatched up by other customers. Factories eventually shut down when they were unable to finish building automobiles, leading to a shortage of about 8 million vehicles in 2021.

So ultimately, because there are less new cars, buyers are now flooding the market looking for pre-owned vehicles. It's the same thing that's going on with houses and even cottage cheese, right now. When you've got new cars that are not being built, and the only thing out there are used cars, the prices is going up. It's inflation.

So, as a car buyer, how should you respond to the microchip shortage?

While no one can’t predict exactly how this chip shortage will affect specific models over time, here are steps you as a shopper can take:

• See what’s available. New and used car choices are limited these days, and chances are that it will get worse before it gets better. Even if dealers boast that they have "plenty" of vehicles, "plenty" can still be deceiving. Ten of the same vehicles in your area might seem like a lot, but if the model is the popular Hyundai Palisade, those could be gone in a heartbeat.

• Don’t expect as many incentives, which are a tool manufacturers use to keep inventory moving. When supply is thin, incentives dry up.

• Don’t be surprised if prices continue to increase, at least on some models, due to diminished supply. Expect used-car prices to remain pretty high as well. This trend likely to keep going.

• Buy now. As I stated above, specific predictions are difficult, but buying sooner rather than later can help mitigate the pitfalls. In the words of dominoes players all around the country, "study long, study wrong."

Now that you have this information, let me do the heavy lifting for you. Schedule an appointment today for the #TigerTreatment