Since the invention of the cars, prices have only gone one way. And this was up. A new car is worth less as soon as you drive it off the car park of the dealer and as soon as you put some miles on it. But the COVID shutdown had a major impact on the supply chain and new cars were hit hard.
As new car inventory supply dried up, the market for used cars, of course, went through the roof, too. But the supply chain is back to more or less normal, so car dealerships are receiving more inventory. But used car prices are still rising and are up about 35% since September 2020. Why?
The answer is very simple: because new cars are too expensive for most people. According to government inflation data, prices for new models are up 21% since September 2020. New car prices are so high that leasing is out of favour. Finance companies don’t want to get involved while prices are so high and probably crash. This is probably not a question about “if” but “when.”
Once the new car inventory piles up prices for those vehicles on stock will start coming down. So, when you buy into the current used car bubble will most-likely take a beating when you want to sell in a few years.
Consumers have always lost money on their cars anyway. it is a depreciating asset. But when the bubble burst, the losses are going to be fast and extraordinary.
It’s a great time to sell a used car but a bad time to buy one.
Sven Franssen