- Prices for used and new cars shot through the roof during the pandemic.
- Even older used cars now cost thousands more than they did in February 2020.
- The average price paid for a new car hit $42,000 in June, up almost $4,000 from early 2020.
- See more stories on Insider’s business page.
Not too long ago, you could pick up a worn but decent used car for something like $5,000 and hit the road.
Those days may be long gone.
The main culprit in all of this is a devastating microchip shortage that has hampered new-car production worldwide and sent buyers flocking to the secondhand market.
In June, new-car inventory plunged to just 46% of 2019 levels, according to Cox Automotive. Declining inventories and a steady demand for new vehicles have pushed prices on dealer lots skyward.
People who have been priced out of the new market or can’t find what they’re looking for due to low supply are now looking to buy used instead, experts told Insider.
Rental-car companies that normally buy new cars in bulk have resorted to stocking up on used cars – and they’re not turning them over at the same rate they used to, majorly impacting the supply and flow of lightly used cars.
All of that has pumped up demand for secondhand cars and diminished their supply, pushing prices higher and higher. The average price paid for a used car went up by nearly $6,000 between February 2020 and June 2021, according to data provided to Insider by automotive research outfit Edmunds.
If you think you can get a good deal by looking at older models, you’re out of luck. Even five-, seven-, and nine-year-old vehicles now cost thousands more than they did in early 2020.
Part of the problem is that people aren’t trading their aging vehicles as frequently as they did before, since they can’t easily replace them with a new car. The average age of a car on the road in the US hit 12 years in 2021, according to research firm IHS Markit.
On the bright side, some experts believe the used-car market has reached its peak and that prices will start to drop in the coming months. The chip shortage at the heart of it all, though, could drag on until 2023.