The pandemic has disrupted the global supply chain, which is having ongoing impact on all sorts of products, from appliances to computers to cars. One of the component shortages affecting all three is semiconductor chips. It’s created a new car shortage that’s also impacting the used car market.
How serious an issue is it for cars? Most car industry experts agree it’s serious, and it could potentially get a lot worse. Jim Foley, Ford’s CEO, called this chip shortage ‘perhaps the greatest supply shock’ he’s ever seen.
Manufacturers have been shifting production to focus on models that rely less heavily on chips. But all of today’s cars rely heavily on them in the obvious places—electronics like infotainment—and less obvious ones, like transmission and climate control.
Prices keep going up
In response to the supply chain crunch, new car prices are steadily on the rise. The scarcity of new cars over the past year has meant that over 10% of buyers have paid higher than sticker price. New car prices were on the rise anyway, even before the effects of the pandemic. So the supply chain impacts have only exacerbated price increases. GM’s full-size SUVs, for example, cost over 20% more this year than they did last year.
The used car market is following the trend
And as new cars become harder to get, as well as more expensive, used car prices and supply are following suit. They’ve been on the rise since last year. Another unexpected twist that’s driving used car prices up is that rental car companies sold off a lot of their inventory when travel came to a virtual standstill during the pandemic. Now that people are starting to travel again, they’re trying to replace that inventory with used cars, which is also driving prices up.
Is it a good time to sell a used car?
It’s definitely a good time to sell a used car. There’s a ton of demand, so you’ll likely be able to sell your car faster than you normally would. It’s also likely you’ll get more money for it than in a normal market. There are plenty of people out there looking for cars, as the country starts to open back up and everyone resumes travel. Car trips will probably be a lot more popular than ever before, at least for a while, as everyone eases back into traveling.
Additionally, the shift to remote work (which is likely to be permanent for many workers) means that lots of people have moved to suburbs and more rural areas. They no longer need to bne near public transportation, and they’re migrating to more affordable areas with more land, and in most cases that means buying cars that they didn’t have before.
A great way to take advantage of the nationwide used car market, and the most buyers, is to list on TRED. We’ll advertise your car to people all over the country so you have more potential buyers, and handle the payment and paperwork for you so you’re totally protected. We even have shipping partners that make it easier for an out-of-the-area buyer to get your car delivered to them.
Is it a good time to buy a used car?
The shortage of supply and the strong demand for used (and new) cars makes the market a little tougher for buyers. But at the same time, if you need a car, it still makes sense to buy. Or, if there’s a particular car you’ve always dreamed of owning, it’s a good time to do that, too.
The market isn’t showing any signs of slowing down—and supply chain constraints will continue through the next year—so chances are, prices will keep going up. So right now is still a smart time to buy, because it will likely be a while before prices begin to dip, or even level off.