Retail Used Car Shopping Hit With Soaring Prices

Post 2020 Market Perspective

Shopping for a used car in the post 2020 market may seem a bit overwhelming without first stepping back for a better perspective on soaring prices and your car shopping options.

Prior to soaring used car prices the story line was that of retail used car inventory being in decline. Those head lines should have immediately been warning bells to used car consumers. Now its reported that the reopening U.S. economy and lingering “pandemic” shortages are driving used cars to their highest prices in decades. JD Power reports highest average used car prices since 1980, to the tune of $25,500 as of April, 2021, an increase of $3,650, nearly 17%, since the beginning of 2021.

Is this the end of the story or do you still have options in this soaring market? First we need to step back while taking a look at the information on hand. We already know past trends show that within both rising and falling economies, or industries, there are winners and losers as a result. In this case consumers are looking for the winning answer to combat soaring prices and that winning answer is? We’ll get to that later.

During the 2020 “pandemic” overall used car sales were expected to decline to a five year low with estimates coming in at 36.6 million yet the year closed at 38.4 million units sold. Though these numbers were down from 2019 totals when used car sales hit record breaking numbers of 40.8 million units sold, the American consumer still played a roll in the outcome by turning to the private used car market. As consumers transitioned to the private sector new car sales fell to the lowest its been in eight years with 14.6 million units sold in 2020, a 2.4 million unit sales deficit compared to 2019 figures.

So, why are there used car inventory shortages? Through our research we’ve discovered a possible answer to this “crisis”. During the 2020 episode millions of Americans were out of work, being told to stay at home, social distance, and wear masks. Dealers warned you needed to follow certain guidelines while restricting access to their showrooms, and so on. In true fashion the American people did what they’ve always done, figure out a way to deal with any and all adversity thrown their way.

Percentage wise private seller used car sales skyrocketed during the 2020 episode taking 49% of the entire used car market share and one of the contributing factors to the overall market finishing strong. This is huge, even with the overall low numbers from 2020. Here’s why, new car sales fell by 2.4 million in 2020. The American people took it upon themselves to do more business through private used car sales meaning fewer dealer transactions with trade-in. On average approximately 43% of new car sales involve a dealer trade-in. Its this diminished trade-in market that’s needed to supply the retail used car market. Many of these trade-in vehicles move directly to car auction houses where cars are purchased by smaller used car dealers and reintroduced through retail used car sales. Without steady supply of dealer trade-in vehicles the retail used car market is now facing inventory shortages.

So, what are your post 2020 used car shopping options? One, you can join the hype and hysteria at the dealer, dig deep into your pockets for that reported average $3,650 additional coin its going to cost for your next retail used car purchase, or two, you can shop quality used cars sold by private sellers and paying less of your hard earned dollars for that same make, model, and year used car your shopping for. The answer to the previous question is, YOU!

In conclusion: Shopping for a used car in the post 2020 markets soaring prices should not be not as scary as you’ve been lead to believe. The used car market inventory simply shifted from a dealer majority control to the private seller market. In general when big business sees profits dripping into consumer pockets, big headlines are sure to follow. As private used car sales continue upward, regardless of dealer “inventory shortages”, used car dealers may be forced to halt price gouging strategies as retail used car sales continue to plummet.