Used Car Prices Set to Rise as Inventory Scarcity Continues
The Scarcity of Used Cars in the U.S. Market
The U.S. market is currently experiencing a scarcity of used cars, with inventory levels remaining static between 2.2 and 2.3 million for the past four months. This scarcity is expected to drive up retail prices, following an increase in wholesale rates since late August. In October, the number of unsold cars on U.S. lots fell by 8% compared to the previous year, totaling around 2.26 million vehicles. This equates to a 47-day supply at current sales rates, significantly below the targeted 60-day inventory.
Inventory Shortfall and Impact on Retail Prices
The scarcity of used cars has been particularly noticeable in the lower-priced segment. Currently, used vehicles priced under $10,000 have a 32-day supply, indicating a tight inventory situation. This shortage suggests that new car buyers should ideally have an annual income of $100,000, as cars under $20,000 have become nearly nonexistent. On the other hand, the highest supply of used cars, standing at 58 days, can be found in the over $35,000 category, encompassing both luxury and non-luxury brands.
Automakers’ Inventory and the Impact on Prices
Honda, Mazda, and Toyota had the smallest inventory among non-luxury brands in September. Kelley Blue Book predicts that used car prices will remain high due to the significant reduction in automakers’ production during the pandemic. It is estimated that eight million fewer cars were produced, and these vehicles might never enter the used car market, leading to higher-than-usual prices for consumers.
This article offers insights into the current scarcity of used cars in the U.S. market and its impact on retail prices. The shortage, especially in the lower-priced segment, suggests that potential buyers should be prepared for higher prices. Automakers’ reduced production during the pandemic is expected to contribute to the sustained high prices of used cars. As the inventory scarcity continues, it is crucial for consumers to understand the changing dynamics of the market and adjust their expectations accordingly.