Is it really appropriate to say Happy New Year anymore? With everything going on, it might be more suitable to simply state, “New Year.” Two years into the COVID-19 pandemic and, let’s be honest, very little has changed since March of 2020.
We’re still wearing the masks, social distancing and quarantining like it’s 1918 again. Can we say anything is different going into 2022?
Well, The Used Car Market Is Changing
But, it may not be the news you were hoping for. It’s no real secret that many people have experienced financial distress throughout the pandemic. Whether they’ve lost their job, been unable to find employment and many other factors.
So, a brand-new car is not in many people’s futures, sorry Elon Musk. But people still need to get from place to place, so the next logical step is a used car. Makes sense, right? Buying secondhand automatically means that you won’t be paying full price for a car because someone’s already driven miles into it.
Unfortunately, inflation might be affecting the used automotive market in a pretty negative way. Due to the ongoing chip shortage, manufacturers haven’t been able to keep up with the demands of their consumers. Some have even stated that the average used car cost was 41% more than pre-pandemic prices back in November.
So, with fewer cars coming into the market, logic can only dictate that prices must rise in order to make a profit and stay afloat.
Exactly How Much Is The Used Automotive Market Affecting Inflation?
Quite recently, U.S President Joe Biden and his administration have blamed the consistent rising inflation on the used automotive market. This market’s contribution to inflation averaged zero within the past 20 years, give or take.
That is until now where data from the U.S Bureau of Labor Statistics shows that number is now more than 1% on a year-over-year basis. Back in December, goods and services rose by 0.5%, while used car prices rose by a staggering 3.5%.
According to White House economic advisor Jared Bernstein, this heavy impact on inflation is both “remarkable and revealing.”
“It’s a reminder of how extremely unusual this current inflation is,” he said. “The world has not forgotten how to produce new (and thus used) cars, and we should expect this series to revert once the underlying supply constraint eases.”
Unsurprising, Bernstein also stated that the shortage of semiconductors used in manufacturing new cars is the leading cause of the supply-chain disruption and its impact on the consumer price index data.
But, There’s Another Factor We’re Forgetting
Demand is simply not as strong as it was back in 2019. Even before the pandemic’s effect on our social climate, remote working was on an incline. According to statistics provided by Small Business Trends, remote work was at a growth of 159%.
Now, with the pandemic, remote working has become more necessary and essential. It was also estimated that approximately 97% of remote workers would prefer to NOT return to the office once the pandemic ends.
Taking out the necessity of commuting to work reduces the demand for vehicles. On average, people spend an hour, both ways, driving to work and back. Take that out, saving a fortune on gas and maintenance; it’s not exactly outside the realm of reality that people would lose interest in owning a car.
Especially since we’re back to quarantining again.
So, What Can We Do Now?
Suppose you absolutely need to purchase an automobile in 2022. In that case, it may be helpful to order your next car from a dealership. In doing so, you can avoid markups and add-ons while ensuring that you’ll get the exact colour and options you want.
Granted, you’ll have to wait approximately eight weeks, but the dealership will save a bundle on lot fees and insurance for vehicles parked on their site.
Home deliveries were always an option for dealerships but were never really taken advantage of because, let’s be honest, going in person means a closer look at the car you want and maybe even a test drive. Now, with this ongoing pandemic, home delivery is becoming more and more inviting for both the consumer and dealership. It may vary on location and brand, but the dealership will likely still want to continue doing business with you.
However, some experts, including Clark Howard, have stated that the prices could return back to some kind of normalcy later this year. More specifically, closer to the fall season. So, once again, just sit back and watch how everything will unfold. Should be good at it by now, you’ve had two years of practice.
