Used car prices have risen by 17% in the last 17 months, Washington Post reports“More than any other commodity on the market.” And it could very well signal that inflation could weaken the economy.
Much of the problem in the automotive sector came from the fact that the automotive industry was massively outraged by the COVID-19 pandemic. The cars did not enter and no one bought used cars. So second-hand car companies began to raise their prices as a way to support the low sales they were making. And when people received the incentive money and the tax refund checks, the demand exceeded the capacity that many lots had.
With the entry into force of the new stimulus bill of the Biden administration, economists were worried that the extra money would “over-stimulate” the economy. Now, I know a lot of people will call this nonsense – the United States is still suffering from a high level of unemploymentt, so people generally theorize that money for stimuli will go to the essentials. But economists believe they can use the history of the used car market to predict trends.
Here is more from the article:
Since the beginning of the pandemic, used cars and trucks have seen the fastest rise in prices for almost any category of consumer goods. data from Burehave Economic Analysis. The only categories that rival them are major appliances and “flowers, seeds and potted plants”, both with prices rising by more than 10% between February 2020 and January.
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Business owners like it [Michael] Darrow says there’s not much room to raise retail prices beyond what they pay at auction. The supply chain for new machines has been constrained by factory shutdown and continued precautions to keep workers safe. And, in turn, it pinches the second-hand car market, which relies heavily on spare parts and car parts. A global shortage of microchips causes even more supply chains.
That being said, it is more expensive for dealers to repair and supply their models, in addition to the additional cost of staying open in a pandemic.
Darrow doesn’t think the price increases he sees can be sustained for long. Buyers know“The value of a car,” Darrow said. Sometimes they wonder how long dealers will be able to charge higher prices for cars and trucks before their customers leave.
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Practically, economists are worried that used car inflation may signal a rapid rise in inflation everywhere, where costs All can jump up to 10%. The federal government aims to keep inflation up to two percent a year and has been steadily declining – but the 17 percent jump in the used car market is honestly pretty awful.