NATIONWIDE — Used vehicle prices hit another all-time high in November. The average list price for a pre-owned car last month was $27,569 – a 2.2% increase from October and a 27% increase compared with a year earlier, according to Cox Automotive.
While all market segments saw price increases, used van prices saw the largest gains, followed by compact and midsize cars.
The escalating prices in the used car market are a direct result of low supply in the new car market caused by the ongoing computer chip shortage. In November, new vehicle sales were down 17% compared with a year earlier, putting the annual new car sales rate at 12.9 million. Before the pandemic, in 2019, total annual new car sales were 17.1 million. In 2020, when the chip shortage first began, annual new car sales were 15.9 million.
The decline in sales reflects decreasing consumer confidence. According to the Conference Board, consumer confidence has fallen four of the last five months and is the lowest it's been since February. In November alone, consumer confidence fell 1.9%. The number of people intending to purchase a vehicle within the next six months fell to its lowest level since 2010, according to Cox Automotive.
"We're seeing an increase in the price of both new and used vehicles, which is very unusual — especially for used vehicles," said Toby Russell, co-chief executive of the online used car marketplace, Shift.com. "Typically they would depreciate, but they've continued to increase in value."
Since January, vehicle owners who have sold used cars through Shift have been getting 30 to 40% more for their vehicles, Russell said.
With no end in sight to the chip shortage preventing automakers from building enough new vehicles to meet demand and shipping delay issues continuing to wreak havoc on imported goods, including cars, Russell anticipates used car appreciation will continue through 2023.
"This will be a slow recovery, not an overnight thing," he said. "It's a very complex supply chain problem."
The best way to beat the steady uptick in used car prices, Russell said, is to buy older, less expensive vehicles that depreciate less rapidly.
Finding those cars, however, could be an issue. Supplies of used cars increased slightly in November but are down 11% from a year ago, according to Cox. The least expensive used cars, priced at less than $15,000, had the lowest supply, whereas pre-owned cars costing $25,001 to $30,000 had the most availability.