DETROIT (AP) – It cost a whole lot more to buy a used SUV, car, truck or van last month than it did before the coronavirus hit, and that almost singlehandedly caused September’s modest consumer price increase.
Blame it on the pandemic, which knocked supply and demand way out of whack, causing prices to spike.
The good news is that inventories are being replenished, and prices are beginning to drop.
“The law of supply and demand worked,” said Earl Stewart, owner of a Toyota dealership in North Palm Beach, Florida. “I think things are coming back to normal.”
When the novel coronavirus made its way to the industrial Midwest and the South in March and April, it forced automakers to shutter factories, and many dealers closed. Sales of new vehicles tanked. With few vehicles being traded in for new ones, and leases being extended, the supply of used vehicles dried up.
At the same time, automakers weren’t producing many lower-priced cars, forcing many buyers into the used-vehicle market. Plus, people who were wary of returning to public transit ended up buying vehicles. Many were armed with government stimulus cheques as a down payment.
Also, lenders had moratoriums on repossessions of vehicles, cutting off another source of used vehicles, said Alex Yurchenko, senior vice president of data science for Black Book, an automotive analytics firm that helps dealers determine vehicle prices.
As a result, the average asking price of a used vehicle that was 10-years-old or less rose more than nine per cent from USD19,800 in May to USD21,600 in September, Yurchenko said.
“It looks like a perfect storm. Higher than usual demand and low supply. It just drove prices up,” Yurchenko said.
It took longer than expected for auto companies to resume production after virus shutdowns in March, due in part to a lengthy restart for the parts supply chain, Yurchenko said.