Used car prices skyrocket in 2021 due to new car shortage
2021 wasn't just a bad year for finding a new car at an affordable price. It was a bad year for finding an affordable used car, too.
Autotrader analyst Michelle Krebs said as new vehicle production nose-dived from the computer chip shortage that began in March, many consumers turned to the used car market instead.
Where they found high prices and a shortage, too.
Krebs says virtually all the reliable sources of used cars declined this year. People who couldn't find a used car to replace their current used car just invested in repairs instead.
There was also a drop in the number of leased vehicles being traded in.
"People are holding onto their leased vehicles waiting for some new product to come onto the market," said Krebs. "And auto companies are extending leases."
Krebs said it also made a lot of practical and financial sense for people to buy their leased cars when the lease was up. That's because new cars are so expensive, that buying their leased cars was a bargain.
Rental car companies also haven't been trading in their cars for new ones - because of the new car shortage. In fact, "now they're out buying used cars, because they can't buy new cars."
The increase in demand, combined with the low supply, contributed to a nearly 40% increase in used car prices in 2021, according to the U.S. Bureau of Labor Statistics' Consumer Price Index.
Krebs says the shortage of used cars won't ease until the new car shortage does - and that could take all of 2022 or longer.