Rising US demand for used cars pushes up prices

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Arlington (United States) (AFP) – The used car market in the United States is experiencing an unprecedented phenomenon: owners are selling vehicles for as much or more than they paid for them.

The strange twist comes as a global shortage of computer chips amid the Covid-19 pandemic has stalled auto manufacturing, fueling a rise in used vehicle prices, which in turn has helped drive inflation record in the United States last year.

“100% is a new trend,” which isn’t likely to end soon, said Aurélien Guillaud, owner of Arlington Auto Group (AAG), a car dealership based in Arlington, Va., just outside the city. national capital.

Due to the shortage of new vehicles, there has been an influx of used car inquiries, he said.

New government data on Wednesday showed U.S. consumer prices jumped 7% last year, the biggest increase in nearly four decades, fueled in large part by the staggering 37.3% rise in prices for used cars and trucks.

Given the difficulties in obtaining semiconductors from factories in Asia amid the pandemic which has limited new car inventories, car rental companies have clung to their fleets, cutting the usual regular supply of vehicles for the used car market and driving up prices.

And strict lockdowns in China to contain the Omicron variant could exacerbate supply issues.

“Compared to a year ago, now you buy the same car for $20,000 instead of $16,000,” and resell it for $24,000, AAG director Eddy Malikov said.

The dealership’s lot has 40 vehicles ready to sell, less than its usual inventory before the pandemic. Last year was strong for AAG, which sold 300 to 400 cars despite price hikes turning away a number of customers.

Coming to collapse?

Americans’ reluctance to use public transportation amid the pandemic is also a factor driving strong demand for cars.

“There’s not a lot of supply, but there’s a huge demand,” Guillaud said.

He notes that in Europe commuters can choose to use a scooter or motorbike, but “here it’s a car because of the distance you have to travel.”

The rise in prices has been spectacular.

Malikov recalled a customer who bought a car for $21,000 in 2019, “and they ended up trading the car in for $21,000 two years later, with 10,000 more miles (16,100 more kilometers), that which was a little ridiculous”.

In other cases, owners sell their car for even more than they bought it.

In a recent study, KPMG analysts warned that the used car boom will not last.

“History tells us that the current frenzy in the used-car market will end,” the authors said, noting that chip shortages and supply chain issues will eventually be resolved.

Then “the huge car manufacturing machine will kick back into high gear and dealership lots will be full again”, after which the used car market will “collapse”, they said, predicting a decline in 30% of the prizes.

Analysts, however, acknowledged that it is unclear when this change will occur and whether the decline could be “sudden or slow”.

But there are signs that major automakers are banking on the boom continuing for a bit longer: General Motors announced plans on Tuesday to launch CarBravo, a new online marketplace for GM-branded used vehicles.

The company will compete with successful companies like Carvana and CarMax.

Guillaud said some people are trying to take advantage of the market, and points to online forums where sellers admit to reselling vehicles two weeks after buying them.

But he warns that Virginia law prohibits individuals from buying and reselling more than five cars a year.

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