James Forcinito is eager to replace his 16-year-old Hyundai with nearly 200,000 miles. The school psychologist scoured new car dealerships, but found few models in the field and high prices. So he turned to the all-caps arrivals and flags waving at used car lots lining Northern Boulevard in Queens, New York – but he suffered another round of sticker shocks there.
Since the pandemic, Forcinito, 35, says he “just spends a lot more of my life in my car, so I want to improve that experience.” But after finding few tires to start and second-hand cars at new prices, he decided to quit for the day. “It’s not like there is a lot to choose from right now,” he said, shrugging but vowing to continue the search.
The used car fleet, usually a haggling and bargaining paradise, is now a hotbed for wallet transactions. Soaring used car prices accounted for more than a third of the recent increase in the consumer price index, which rose in June at the fastest pace in 13 years. A rush of buyers taking advantage of an easing of pandemic restrictions has boosted demand even as stocks on dealer lots are already dwindling.
The average used car price hit a record high $ 26,457 last month, up nearly 30% from the start of last year, according to automotive researcher Edmunds.com. The ramp-up is a consequence of how the pandemic has shaken the auto industry: Factory closures due to the health crisis and the global semiconductor shortage have hampered auto production in the past year. , with a reduced production of 5 million vehicles in North America. This has led to historically low inventories in the new car market and pushed the average price of a new vehicle above $ 40,000 – an all-time high that would have been considered a luxury price a long time ago. not that long.
In turn, future buyers of new cars take refuge in used car fleets. Researcher Cox Automotive predicts that used car sales will hit a record 21.5 million vehicles this year, as consumers aim to adjust to the lifestyle changes brought on by the pandemic. Some are hungry for a new set of wheels as they return to the office or navigate suburban neighborhoods after fleeing big cities to more easily practice social distancing. There is a new demand for personal transportation that eliminates the need for people to share space on a train or on an Uber ride. Road trips are also on the rise as travelers continue to avoid congested airports and planes.
“All of the issues that the auto industry is currently facing, both positive and negative, are directly related to the pandemic,” said Jeff Schuster, senior vice president of forecasting at researcher LMC Automotive. “We envision a retail market that is possibly the best it has ever been. “
Indeed, many buyers will not be discouraged. It helps that, in the midst of unprecedented pricing, car buyers can keep their monthly payments on an expensive vehicle more manageable through cheap financing and high trade-in values.
“An extraordinarily boosted demand, combined with an extremely tight supply, has come together to form the most frenetic spring you can really imagine,” said Jonathan Smoke, chief economist at Cox Automotive. “We’ve never seen this kind of price increase before. “
In nearly 40 years of car sales, Brian Benstock has never seen anything like it. The general manager of Paragon Honda and Acura in Queens has about a tenth of the inventory he would normally have. And even if the dealership does not negotiate the price, buyers continue to take hold of its vehicles. “Imagine a trapeze: a car enters, a car leaves, a car enters, a car leaves”, explains Benstock in his showroom. , surrounded by a sparse supply of vehicles on the ground. “We have about six days of car inventory left, which is very, very slim. With such a short stock, the floor of the showroom has become a sort of cage between the sales staff.
“It’s really ruthless,” said Jared Luner, a car salesman at Columbia Honda in Missouri, who recently asked a colleague to sell one of the few vehicles in the lot under him. “Normally we’re all friends and colleagues, but right now when someone stops it’s a little nervous.”
And if buyers care about a specific model in a particular color, Luner says he often has to “shake their hands and say ‘Good day and good luck.’ “
Desperate to fill their used lots, dealers have bombarded their customers with requests to part with their existing vehicles, offering generous trade-in prices and even agreeing to buy back leases months before they expire.
CarMax, the largest seller of used vehicles in the United States, said it bought 236% more cars from its customers this year than last year. That has left the national chain with what it says is the country’s largest used car inventory of around 40,000 vehicles, but that’s still a drop of 10,000 cars from last year. Jim Lyski, executive vice president of corporate strategy, marketing and products for CarMax, said in response to questions sent by email. “We expect prices to remain high in the near term. Even clunkers are worth more than ever. Used vehicles with 100,000 to 109,999 miles on the odometer averaged $ 16,489 in June, up 31% from $ 12,626 last year, according to Edmunds. Pickup trucks are the most valuable of the 100,000 mile (161,000 kilometer) fleet. A Chevrolet Silverado 1500 that hit that mark sold for an average of $ 26,914 last month, up 49% from last year, while a Ford F-150 of a similar vintage ordered averaged $ 25,924, a gain of 43% over a year ago.
“It shatters the myth that at 100,000 miles a car is dead and has no value,” said Ivan Drury, analyst for Edmunds. “Consumers with an old truck in their driveway are in the best position to take advantage of this wild market. “
Dealers don’t just collect inventory from individual consumers; they also depend on auctions to fill their used car lots. Even though they have to pay high prices at auction right now and usually don’t come out with as many models as they had hoped, they are forced to seek them out in order to have something to offer buyers. Manheim Auto Auctions, the largest auto auctioneer in the United States, has about a third of its lot inventory compared to two years ago. Auction lanes – where the stock is akin to the trading floor of a stock exchange, except with large vehicles running through it – have become so expensive that bidders can feel like they’ve entered a marketplace. sale of works of art.
“There’s a lot of disbelief in the prices they see – they’re shaking their heads and there’s a lot of reluctance to put up your hand,” said Matt Trapp, regional vice president for Manheim. “But as soon as they see their competitor across the street raise their hand to a car, they’re like, ‘Well, pull up, I need cars on my lot. “”
This record price hike has likely peaked, according to the Cox Smoke economist. Beyond the imbalance of supply and demand, the spring sales season was boosted by government stimulus controls.
“We’ve had the mom of all springs because we’ve had two rounds of stimulus in the first three months of this year, combined with the tax refund season,” Smoke said. “All of that money has certainly encouraged the spike in demand frenzy that we’ve seen.”
But offers on wheels will remain difficult to find. “The bad news is, I don’t think there’s really much relief to come,” said LMC’s Schuster. “We are so far from normal that these high used car prices should be with us for sure for the rest of the year.”