Used car prices rising faster than Bitcoin as 2022 begins

Used car prices have skyrocketed and are accumulating value more quickly than Bitcoin, according to industry insiders.

A global shortage of semiconductor chips and pandemic-fueled declines in automotive use has boosted the value of used cars by thousands of dollars, says Hans Dau, a supply chain analyst and CEO of the Mitchell Madison Group business consulting firm.

“The spike in used car prices might be the only truly transitory piece of the inflation picture in the economy today,” Mr. Dau said. “COVID threw a monkey wrench into chip manufacturers’ planning process, as people stayed home and reduced chip production was allocated to consumer electronics.”

What’s more, market researcher Jim Bianco told CNBC’s “Trading Nation” on Thursday that the Manheim Index of Used Car Prices showed the price of used cars rising more than 20% during the last four months of 2021 while Bitcoin itself rose only 5%.

The latest Manheim Index on Dec. 15 was 239.8, reflecting a 48.9% increase in the average used car price in the United States from December 2020.

Wholesale used car prices rose 3.1% in the U.S. during the first two weeks of December compared to November, according to Manheim.

And the automotive inventory information website said the average price of a used car in the U.S. was $29,011 in November, a 39% increase from 12 months earlier, The Associated Press reported Monday.

A woman in Omaha, Nebraska, paid $7,500 for a 2013 Toyota Scion with 160,000 miles on it in November to replace a car that had been totaled in a crash, according to the AP.

David Sacco, who teaches finance at the University of New Haven, said the pandemic has had a roller-coaster effect on supply and demand across the economy.

“First, demand went down significantly due to people staying home and some losing their jobs,” said Mr. Sacco, a cryptocurrency expert. “Demand then rapidly increased due to direct stimulus payments and increased personal saving during the early stages of the pandemic.”

Car buyers also are dealing with surcharges slapped on some of the most popular automobiles, including SUVs, pickup trucks and sports cars.

The so-called market adjustments to the manufacturer’s suggested retail price (MSRP) have added $5,000 to $10,000 to a car’s final price, with some consumers reporting markups as high as $20,000.

Automotive website found that the average used car price was 11.4% above MSRP, while new car prices were more than 20% higher.

“There is no indication that this is moderating or lessening,” said Karl Brauer, a senior analyst at iSeeCars.

But Mr. Dau said drivers who hope to profit by selling their old cars should act fast: Since more than 60% of the world’s semiconductor chips come from Taiwan, he expects the issue “will work itself out in short order.”

“I view the car chip shortage as a sign of the success of the free market,” he said. “With many workers working from home, would you rather have a laptop and a new iPhone or more cars?”

Financial pundit Charles Mizrahi said the skyrocketing used car prices will end only when the high demand for cars does. Exactly when that happens, he added, will be anyone’s guess.

“Simply put, used car prices will continue to move higher until there are more cars to choose from,” Mr. Mizrahi said. “If you need a car to get to and from work, and the price is higher by $1,000, what’s your alternative? Until more supply enters the market, this is going to continue.”

• Jeff Mordock contributed to this article, which is based in part on wire service reports.

Katherine E. Ackerman

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