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Used car costs soar amid COVID pandemic. Here’s when experts say they could come down

Shortages spurred by the pandemic have made used cars more expensive.
Used cars
(Getty Images)

If you’re in the market for a used car, you’ve probably noticed they’re more expensive than normal.

Shortages related to the coronavirus pandemic have driven up prices — meaning the market is good for sellers but not so much for buyers. And while some experts have offered predictions about when costs could come back down, others say it’s unclear how long they’ll stay high.

The average price of a used car increased by 12.5 percent between last year and this year, from $21,020 in February 2020 to $23,643 in February 2021, according to the National Automobile Dealers Association.

Ivan Drury, an auto industry analyst with Edmunds.com, told CNN that lightly used cars are currently selling for 70 percent to 80 percent of their sticker price, up from 65 percent to 70 percent in 2019.

So car industry experts are offering their advice to help buyers and sellers navigate the current market.

When could prices come back down?

Consumer Reports says demand for used cars is likely to continue increasing over the next few months as more businesses reopen and people look to spend their stimulus checks or tax refunds. But it says the “bottom line” is to buy a car when it’s “right for you.”

“The market will calm down eventually, but it may take some time,” Consumer Reports says. “So if you want to buy now, do your research on current pricing and deals, and be open to considering several models to increase your chance of scoring significant savings.”

Consumer intelligence agency J.D. Power predicts used car prices will continue rising even after the pandemic eases.

“This should happen relatively slowly, however, and last for a moderate period of time,” J.D. Power wrote in early March. “The current pandemic-related spike is just an anomaly. Regardless, the advanced technology features, increased production costs, and pandemic-related inventory issues should keep the prices of used cars at a modest ascension for years to come.”

But, while J.D. Power says it’s unlikely prices will fall back to what they were before, “today’s inflated prices are unlikely to become the new normal.”

Ron Montoya, senior consumer advice editor at Edmunds.com, wrote in April that car pricing and inventory will likely be affected through “at least the second half of 2021.”

“This means that 2021 will not likely be a normal year in terms of the discounts you may encounter,” Montoya wrote. “Edmunds experts advise consumers in the market for a new car to start shopping sooner rather than later.”

Why are prices so high?

Computer microchips and other supplies necessary to make vehicles have been in short supply over the past year.

When dealerships and car manufacturers shut down at the start of the pandemic, CNBC reports that chipmakers shifted their focus to electronics like computers and video game consoles. Now, they’re struggling to keep up with renewed demand from the auto industry.

“The chip shortage is causing a lot of mayhem,” Drury told CNBC. “But those chips are critical to a car because it’s basically a rolling computer.”

Data from Cars.com shows new car inventory decreased by more than 15 percent between February and April.

As new car inventory fell, consumers turned to used cars — putting a strain on that supply and driving up prices, according to Cars.com.

But some used cars are more expensive than others.

“The vehicle’s brand, age, mileage, condition and features all influence its value when selling or trading in at a dealership,” Cars.com says. “Typically, the demand for a specific vehicle type also impacts the value. For example, pickup trucks and large SUVs are in high demand, whereas the demand for sedans is shrinking. With all the pent-up demand from the pandemic, prices are elevated across the board.”

While it’s more expensive to buy a used car now, some experts say it’s a good time to sell any extra cars you may not be using.

Drury told CNN it’s a good idea to check online for how much your spare used car is worth.

“At a minimum, you’ll know how much it’s worth,” Drury said. “And, at the same time, you might actually find out, yeah, this is not worth having at the same time.”

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