Back in the early months of the coronavirus pandemic, when much of our normal lives slowed down considerably, sales of one item were really speeding up.
Be it a sedan, minivan, SUV, truck or sports car, many Americans suddenly wanted to get their hands on a steering wheel. In June, there was a 22% surge in the number of used cars and trucks sold at franchised car dealers, The New York Times reported, citing data from Edmunds.
The article noted that uptick in demand was fueled by three dynamics. Some people wanted to avoid public transportation during a pandemic. Others bought used (rather than new) cars to save money amid economic uncertainty. And Covid-19 put the brakes on auto production in the spring, which pushed some would-be new car buyers into the used market.
A car craze. As with some other hot commodities this year (yeast and puzzles, for example), Car and Driver observed that “used cars are having a moment.” NPR explained it as such: "The pandemic reduced the supply of cars at the same time it increased demand for them. It's Econ 101 — the result was prices went up. And up. And up."
The used car effect. The market for used cars is so hot that some models are selling for more than buyers paid years ago and appreciating in value (the opposite of what normally happens).
In fact, inflation for used cars rose 13.4% in September from one year ago, compared with a decline of 1.8% on average since 2012 , Goldman Sachs economists noted. What’s more, the spike in used vehicles accounted for the entire 1.7% increase in core CPI (the consumer price index measure that excludes food and energy) that month.
Some people are sour on the market. Of course, there’s always the risk of buying a lemon, but there are other reasons why some people don’t find the demand for used cars to be so sweet. In the summer, New York City Mayor Bill de Blasio urged city dwellers to hold off on car purchases, while public transportation advocates cautioned about possible congestion problems. What’s more, CNBC called the used car market one of the “trickiest,” especially for buyers trying to balance finding a recent model with a price they can afford.
But can it last? The good news for potential buyers (and bad news for would-be sellers) is that the used car market is starting to cool off. The past few months have been “some of the best times to sell or trade-in a car,” analysts at Edmunds noted, but prices are starting to drop. As Goldman Sachs economists pointed out, the coronacrisis boosted inflation to “an unsustainable pace” for used cars and they expect auto inflation to normalize in 2021 if a vaccine arrives.
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