$29,000 for an average used car? Would-be buyers aghast

DETROIT  — A couple of months ago, a woman paid a visit to Jeff Schrier’s used car lot in Omaha, Neb. She was on a tight budget, she said, and was desperate for a vehicle to commute to work.

She was shown three cars priced at her limit, roughly $7,500. Schrier said the woman was stunned.

“‘That’s what I get for $7,500? ‘” he recalled her saying. The vehicles had far more age or mileage on them than she had expected for something to replace a car that had been totaled in a crash.

The woman eventually settled on a 2013 Toyota Scion with a whopping 160,000 miles on it. Schrier isn’t sure he made any profit on the deal. “We just helped her out,” he said.

As prices for used vehicles blow past any seemingly rational level, it is the kind of scenario playing out at many auto dealerships across the country. Prices have soared so high, so fast, that buyers are being increasingly priced out of the market.

Consider that the average price of a used vehicle in the United States in November, according to Edmunds.com, was $29,011 — a dizzying 39% more than just 12 months earlier. And for the first time that anyone can recall, more than half of America’s households have less income than is considered necessary to buy the average-priced used vehicle.

The days when just about anyone with a steady income could wander onto an auto lot and snag a reliable late-model car or buy their kid’s first vehicle for a few thousand dollars have essentially vanished.

“I’ve never seen anything remotely close to this — it’s craziness,” said Schrier, who has been selling autos for 35 years. “It’s quite frustrating for so many people right now.”

David Paris, a senior manager at J.D. Power, noted that used vehicle prices are directly tied to the cost of new ones. Though some automakers report that the computer chip supply is gradually improving, prices paid by dealers at used vehicle auctions kept rising through November, Paris said.

“We’re not seeing any softening in prices, which is extremely rare for this time of the year,” he said.

New vehicle dealers have about 1 million vehicles available nationally — scarcely one-third of the normal supply, Paris said. And the vast majority have already been sold.

Since the pandemic started, used vehicle prices have jumped 42% — more than double the increase for new ones. Last month, the average used vehicle price was 63% of the average new vehicle cost. Before the pandemic, it was 54%.

At this point, Schrier has to tell lower-income buyers that he has very few used vehicles to sell them.

“What used to be a $5,000 car,” he said, “is now $8,000. What used to be $8,000 is now $11,000 or $12,000.”

from Boston Herald https://ift.tt/3sYGEQX