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This spring was not a good time to buy a used car. Prices of recent used models almost matched those of new cars, thanks in part to the chip shortages that began plaguing the industry in April.
But the worst is behind anyone looking for a reasonably priced vehicle. Reports show that wholesale prices of used cars already peaked in May. Prices on individual vehicles are expected to start dropping this summer, making now a good time to start researching makes, models, and car insurance prices.
What caused the spike in used car prices?
The pandemic caused a lot of change in the economy, and the auto industry was no exception. Besides the microchip production problems, Bloomberg says reactions to the pandemic by consumers and businesses helped cause the current, high prices for used cars.
Some people saved a lot of money during the pandemic. Thanks to government aid and benefits, the average family income actually increased in 2020. But because of the restrictions on travel and gatherings, most people stashed their extra cash.
Now that the economy is reopening, people are ready to spend their savings on big-ticket items, and the demand for cars has shot up quickly.
Businesses also made short-term decisions to survive the lockdown. Rental car companies like Hertz sold off large portions of their fleets to make up for losses caused by the halted travel and tourism industries, according to Bloomberg.
Normally, the rental industry replaces their used vehicles with new ones every year. But this year, many industry leaders chose to buy used or wait until the pandemic faded and business increased.
Why are used car prices expected to drop soon?
The initial influx in demand is expected to level out over the next few months, as people return to their pre-pandemic lives. Dealers have already responded to this prediction by slowing their purchasing.
CNET claims that wholesale prices were 50% higher in April than they were a year before, but that by mid-June they were only 36% higher. It usually takes at least a few weeks for those price changes to reach consumers, but you should start seeing tag numbers decreasing on car lots very soon.
How to bring the cost of a new car down
With the demand for new and used cars so high and the supply chain struggling to keep up, finding a good price for a car right now is not easy.
The high prices at dealerships might convince you to look for a private seller, since people selling their own vehicles are less likely to respond quickly to changes in the industry. Going this route requires a few extra steps, but could be an easy way to save, especially right now.
No matter where you go to buy a car, make sure to research all the costs to own your new vehicle. Using resources like J.D. Power, Consumer Reports, and Kelley Blue Book can help you make an informed decision.
Shopping around for car insurance can also help you save on your new big purchase, and using Jerry makes it quick and easy.
Jerry will generate competitive quotes from top providers in less than a minute. Jerry gathers your information from your past insurer, so you're not responsible for any long forms or phone calls. Basically, you get all of the savings and coverage, with none of the hassle.