GRAND RAPIDS, Mich. (WOOD) — Car dealers and analysts say people who are selling their used cars currently are seeing unprecedented profits.
Doug Mosier, the used car manager at Betten Imports on 28th Street in Grand Rapids, said there’s a large demand for cars and very little inventory nationwide. Mosier credits supply chain issues as a result of the pandemic that have slowed the production of new cars, leading more buyers to turn to used cars.
“When we had the COVID shut down, I was a nonessential worker for a couple weeks but then the car business came back with a fury and we didn’t have a lot of cars. But now we’ve got more cars than we’ve had in a long time,” said Mosier as he stood in front of a line of used cars.
At Betten Imports, they say their used car stock typically comes from people turning their cars in after their lease is up.
“What’s happening now is people are buying their leased cars and the lease market really feeds us and with them buying their own cars we’ve had to figure out different ways to get cars,” Mosier added.
Mosier said the low supply of vehicles for dealers to buy means they’re paying much more to get the cars they can. This also means they have to sell the cars to drivers at a higher rate. Mosier said the demand has also resulted in more buyers from out-of-state reaching out to their dealership for specific cars. He said they’re now doing four to six out-of-state deals every month.
Auto West GR on 28th Street said they’re seeing similar issues. They say they normally find their used car stock at auctions but there haven’t been as many cars coming down that pipeline as there were pre-pandemic. They say they’ve found themselves reaching out directly to car owners more often than they were before.
“It’s not unheard of for us to go on Craigslist and buy vehicles, for us to shop on Facebook Marketplace ourselves to try and find vehicles. If we can find a good-quality vehicle from a consumer, we’re going to pay more just to get that vehicle in ourselves because we simply can’t get it at the auction,” said Autowest GR owner Donald Miller.
Miller says his team has the cars inspected to ensure their quality before adding them to the lot.
Miller says the high demand has forced him to put five buyers on the road to look for cars in other states to add to their inventory. He estimates used cars have gone up in value by about 22%. He says sellers are now getting more money for their used cars than ever before.
“You never really thought of a vehicle as an asset that’s going to climb in value over time but it’s been happening,” said Miller.
Analysts say this trend could continue for a year or more but there is potential for the market to topple.
“If we’re buying these vehicles at the absolute peak or frankly higher than the peak — in some cases some of these used vehicles are selling for as much or more than they sold new — that concerns me greatly as an analyst because you worry about the bottom falling out,” said Mike Wall, an Auto Analyst with S&P Global Mobility. “You worry about that owner owning that vehicle in two years and wanting to trade it in. One could say again that we’re at least going to be wrestling with elements of this for a good period of time. So I’m not saying that the prices are going to fall off a cliff but there’s a risk for certainly seeing a right sizing in vehicle pricing especially on the used vehicle side because it’s gone up like a rocket ship.”
Wall said although there’s a risk of prices dropping significantly, he doesn’t predict thing will change until the supply chain issues for new vehicle production are sorted out.
“I think you’re going to start to see some of these component shortages improve but it’s not a light switch, that’s the challenge with all of this. It’s going to be a progression,” said Wall.
Wall recommends people in the market to buy a used car remain flexible with their wish list as inventory remains low. He also recommends people put down as much money as they can on used cars, beware of your interest rates and try to get a shorter-term loan if possible.
Dealers also say cars like SUVs and trucks are beginning to decrease and in some cases plateau in price as demand falls due to high gas prices.