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Cars are expected to depreciate in value as soon as you take them off the showroom. Still, prospective user car customers might have lately noticed something strange – rising prices of used cars. Let us help you understand the reason behind this surge!

 

How Much Does a Used Car Cost?

Even under the best-available circumstances, it is common to observe some fluctuation in the sales of used cars from one year to another. However, since the start of 2020, prices of used cars have been constantly on the rise. By the time of summer last year, the average price of a used car had gone up to reach as high as $21,558* -a record high. To surprise everyone, prices are only rising since.

While the costs of used cars continue rising, it is still not difficult to get yourself a lucrative deal. If you remain open to different options, there is still an array of affordable used car options that fit your budget and needs. However, if you are specific about a particular color, make, or model, then you can end up paying a premium in the current market. It is recommended to search for the right used car inventory and buy used cars that fit your budget requirements.

 

Covid-19 Driving the Price Surge

The market of used cars depends significantly on a constant supply of vehicles. Under normal circumstances, it is not any problem. Normally, people continue selling out their cars to purchase a new one. Otherwise, the lease of vehicle owners ends and the vehicle is sold out eventually. Rental cars are also known to contribute to a significant percentage of the market of used cars as they continue replacing old fleet with brand-new ones.

However, when consumers are not buying new cars, they will continue holding on to the old models. Due to this, fewer models of used cars are available in the market. Without the presence of a healthy market for the sale of used cars, the supply of used cars eventually dries up. This is what we are exactly experiencing since the advent of the global COVID-19 pandemic. The pandemic has indeed impacted the used car market in several ways.

• The shortages of the supply chain have forced manufacturers produce fewer brand-new models -increasing the overall costs and discouraging individuals (a number of them going through financial struggles) from purchasing new cars.
• Record levels of financial anxiety and unemployment have encouraged people to buy used cars rather than new ones, or simply retaining their old car currently until the economy gets stabilized.

These factors contribute significantly to a singular result -fewer availability of used cars in the market. As a result, more people are eagerly lining up to purchase them. You must be aware of the fact that less supply and higher demand will create higher prices. The good news about the impact of the global pandemic is that it will be temporary. Conditions related to the supply chain have improved significantly for new entrants in the automobile industry. As the lives of people are returning to normal gradually, their spending habits will also improve. It is unlikely to observe the costs of used vehicles to the pre-COVID levels. However, the inflated prices are unlikely to become the new normal.

 

Response to the Pandemic Contributing to the Increase in Price

The response to the COVID-19 pandemic by both businesses and governments has also contributed to the higher prices of used cars.

As the IRS distributed stimulus checks to Americans, they estimated that most individuals will spend the money paying for overdue and rent bills. Indeed, a number of struggling Americans made use of their checks to bring themselves out of financial crisis. However, millions of them spent their finances on exercise equipment, home appliances, and even used cars.

 

New Cars are More Expensive

Another contributing factor to the rise of the price of used cars is not related to COVID-19. In simpler words, new cars are getting more expensive. It is because as the price of new cars rises, so will the price of used cars. There are several reasons due to which prices of new cars are rising. High-strength, modern steel frames are becoming lightweight and safer in case of a collision when compared with older structures. However, this advanced technology is available at a higher cost. At the same time, cars have also become larger -increasing the total amount of raw materials needed for manufacturing them.

Some other reasons for the price rise are regulatory. For instance, most nations across the world are raising the standards for vehicle emissions – also for the factories that manufacture them. Manufacturers are expected to invest millions in the research & development phase to meet the upcoming challenge -making the cars more expensive.

Moreover, new cars are becoming effectively equipped in comparison to older models. A fully-loaded contemporary vehicle might feature surround sound, heated seats, a motorized hatchback, a GPS, LCD monitors across seats, parking assistance, and so more. All of these inclusions cost whopping amounts of money.

 

Conclusion

It can be estimated that the ongoing trends might rise in the coming times -even as the pandemic ends. As such, the prices of used cars are likely to continue increasing. This might happen relatively gradually. However, these can last for a moderate period of time. The current spike related to the pandemic is only an anomaly.

Irrespective of the fact, the features related to the advanced technology, inventory issues related to the pandemic, and improved production costs will keep the costs of used cars at a moderate ascension for more years to come. If you are in search for used cars at cost-effective prices, Used Cars Dealers Austin serves to be your one-stop destination as the used car inventory to get your desired car model.

FAQs

Why are used car prices rising so rapidly?

The rapid increase in used car prices is primarily due to a shortage of supply and increased demand. The COVID-19 pandemic disrupted supply chains, leading to fewer new cars being produced and a reduced availability of used cars. Additionally, financial uncertainty and higher prices for new cars have pushed more people to buy used cars, driving up prices.

How did the COVID-19 pandemic affect used car prices?

The pandemic led to a supply chain disruption, causing manufacturers to produce fewer new vehicles. This shortage of new cars reduced the availability of used cars, which, combined with increased demand from buyers, caused used car prices to surge.

Are used car prices expected to remain high?

While the current spike in used car prices is largely due to pandemic-related disruptions, prices may remain elevated due to ongoing issues with production costs and technological advancements. However, as supply chains normalize and the economy stabilizes, the extreme price hikes may eventually subside.

What impact do new car prices have on used car prices?

When new car prices increase, used car prices tend to rise as well. This is because the cost of newer models influences the market value of older models. As new cars become more expensive, buyers often turn to used cars, increasing their demand and, consequently, their prices.

How can I find a good deal on a used car in the current market?

To find a good deal on a used car, consider being flexible with your preferences regarding make, model, and color. Broaden your search to include different dealerships and online platforms. Additionally, exploring less popular models or higher-mileage vehicles can help you find more affordable options.