2021: A Used Car Market Like No Other

We've Been Following the Used Car Market for Over 30 Years. We've Never Seen Anything Like This.

Skyrocketing prices. Little to no inventory. Bidding wars. No, we're not talking about the real estate market. This is the reality of the used car market in 2021. It's been fueled by a combination of factors, a perfect storm that is pushing values higher at unprecedented rates. While we've occasionally seen this in spot markets (say, after a large natural disaster), this time it is pretty much everywhere.

What's fueling this? There are several factors; here are the most significant:

Constricted new car availability due to global chip and resource shortages

Disruption and failure of supply chains

Expansion of the money supply through direct government payments to individuals

Easing of payment requirements for many consumer debt obligations (temporarily freeing up cash)

Post CV-19 consumer demand

Increased acquisition costs for dealers

Opportunistic car dealers

Media reinforcement

The last two are not structural, but they do play a part. To be sure, it's costing more for dealers to fill inventory. Often, they acquire cars in markets hundreds of miles (or more) away from them as there is no supply to be had nearby. Still, undoubtedly there is gouging going on, with some dealers padding markups and charging more for add-ons beyond traditional levels. As justification, they can simply point to the myriad of media reports about the used car market.

If you're looking to trade in for a new car, you're not going to find much relief there, either. While you might get more for your trade-in, new car pricing is rarely being discounted, limiting your ability to capitalize on the situation. In fact, to fully take advantage of the market you should sell your car privately a hassle which many people want to avoid. So, as usual the consumer is left holding the bag.

At some point this will end and the market will return to equilibrium. That used vehicle you're looking at now is going to depreciate quickly and steeply. If you can wait at all on a purchase and are concerned about money, we recommend strongly that you do so.