The Used Car Price Spike of 2021: Why Prices Rose and How They are Finally Coming Down

You saw it on the news, in your feeds. . . used car prices spiked in 2021 to 2022 upwards of 30%. One major factor was the global shortage of new cars caused by the COVID-19 pandemic. Remember the chip shortage? Many car manufacturers experienced delays in production due to supply chain disruptions and temporary factory closures. As a result, the supply of new cars dwindled, leading to an increase in demand for used cars.

In addition to the shortage of new cars, there were also other factors that contributed to the rise in used car prices. One was the increase in e-commerce and online shopping, which led to an increase in delivery and transportation needs. This in turn led to a rise in demand for pickup trucks and commercial vehicles, which are often purchased used.

Another factor was the economic uncertainty caused by the pandemic, which led many consumers to prioritize saving money and avoiding large purchases like a new car. Instead, they turned to used cars as a more affordable option.

Finally, low-interest rates also contributed to the rise in used car prices, as they made it easier for people to finance their purchases.

Now, in 2023, used car prices are finally starting to come down. This is due in part to the improving economy and the increasing availability of new cars as production has ramped up again. In addition, with more people getting vaccinated and COVID-19 cases declining, there is less of a need for transportation for essential purposes, leading to a decrease in demand for used cars.  Unfortunately, the FED has raised the interest rates, which means it cost more to borrow, but one of the goals is to lower the price of cars.