May 27, 2022

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Half the Automotive

Used Car Price Bubble Predicted To Pop Soon

⚡️ Read the full article on Motorious

Bad news for everyone who bought high…

Thanks in large part to the shortage of automotive microprocessor chips, there’s been a shortage of new cars in the past year, driving used vehicle prices sky high. In some extreme cases, this has resulted in some trucks, SUVs and even cars which are only a few years old selling for more than they did when brand new, leaving many shoppers in extreme sticker shock. While some have shelled out for the higher prices for a number of reasons, others have decided to hold out until sanity returns to the market. It looks like the price inflation bubble popping is now on the horizon, bringing both good and bad news, depending on where you sit.

Learn why a guy blew up his Tesla here.

Per a recent report from Automotive News, analysis of data collected by KPMG revealed that the average used car price will fall about 20-30% sometime in late 2022 or early 2023. The earliest the firm believes this will happen is October.

For this to happen, new car supply needs to return to normal and market demand must be at least close to saturated. Even once all the major automakers return to regular production capacity, it could take several months or longer for market demand to even out.

Cox Automotive believes the deflation of used car prices will happen over a longer period. It says things might not even out completely until 2025, which is bad news for hose who have been holding out for the price bubble to pop.

However, KPMG believes used car prices could start to plummet even before new vehicle supply reaches optimal levels. As the market anticipates the increase in new rides, prices might adjust dramatically. While a 20-30% drop in prices will bring some needed relief, right now used car prices are 42% higher than they were in January of 2020. In other words, the decline could be more severe or it could come in several waves. That’s bad news for anyone who bought a used vehicle in the past year or so and is planning to sell it sometime in 2023.

KPMG did throw out some other possible future scenarios, including one where used vehicle prices remain just as high for the foreseeable future. In another scenario, the firm observed how the Federal Reserve responds to rising inflation could absolutely kill consumer demand for most vehicles.

Out of the major automakers, only Toyota has been able to return to regular production volumes. The Japanese company won’t disclose how it’s doing so, but rumors about it sourcing chips from Apple and other theories have run rampant. Why other automakers haven’t figured out how to do the same isn’t clear, but hopefully they will soon.

Source: Automotive News

Photos via Facebook and Craigslist

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