The new car shortage three years ago is raising used car prices today
The new car shortage three years ago is raising used car prices today
Three years or so ago, we spent a lot of time talking about the factors that created a serious shortage of new cars — the pandemic-driven supply chain disruptions, which lasted a while.
Those problems three years ago are making some used cars more expensive today, according to the automotive site Edmunds. It reported that in the final quarter of 2024, the price of 3-year-old used cars — the relative few that automakers managed to deliver during the shortage — ticked up more than 3% from the same period a year earlier.
Traditionally, a 3-year-old car is kind of the gold standard in the used car market because three years is often the length of a new car lease. So when leases are up and the lessees get in their next vehicles, their old cars hit the used market, said Jonathan Banks at J.D. Power. And there’s a lot of demand for them.
“It’s usually [got] lower mileage. It’s usually in pretty good condition because when you have a lease, you know, you gotta turn it back in, so you take good care of it. It’s just, like, a really, really nice car,” he said.
The problem now is that three years ago, leasing effectively went on pause.
“Those lease maturities that you normally would see coming back from 2022 new vehicle sales, we’re just not seeing any,” Banks said.
The new car market in 2022 was kind of a mess. Supply chain snarls limited vehicle production, but demand was high.
And so, Ivan Drury at Edmunds said, dealers stopped offering inexpensive lease options.
“They just took those away. There was no need for them to essentially juice the sales, as we call it, and people had to purchase,” he said.
And when drivers purchase a car, Drury said, they typically keep it longer.
“So what normally would have just shown up at the dealership in two or three years is now going to take probably six or seven years,” he said.
Taking away that supply puts upward pressure on used vehicle prices, which were already pretty high because the shortage of new cars drove a lot of buyers into the used market.
And supply problems in that used market aren’t likely to go away soon, said Kristin Dziczek at the Federal Reserve Bank of Chicago.
“It’s like this big, you know, rat that has to go through the snake, I guess. It’s going to take years before we really get on the other side of it,” she said.
Until then, for people looking for that 3-year-old off-lease car, the market’s going to be tough. “We’ve seen dealers, you know, they say they’re getting hits on cars that have 100, 120, 130,000 miles on them,” Dziczek said.
Normally that’s not a hot item. But, take what you can get, I guess.
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