As inflation ran wild in 2021, hitting a 40-year high of 7 percent, two especially hard-hit categories of goods meant that car fans and everyday motorists were affected more than anyone else: used cars, and gasoline.
AP News crunched the numbers, finding that gasoline was 50.8 percent more expensive than in December 2020, while used car prices rose a staggering 37.3 percent. Granted, much of the increase in gas prices could be attributed to the fact that holiday travel was much more prevalent this past year than in late-2020, and the cost of fuel has yet to surpass the elevated levels seen from 2011 through 2014, let alone their all-time peak in 2008. And as AP News reports, it’s also largely tied to international conflict; recent turmoil in Kazakhstan has forced the country to cut oil production, further reducing supply.
Still, it’s just another rise in costs that American motorists have to contend with.
What’s The Deal With Used Car Prices?
The inflation of used car prices, meanwhile, can mostly be blamed on high demand and a reduced supply of new cars, thanks in large part to global supply shortages of things like semiconductors. It was shocking news when the average price of a new car in the US crossed the $40,000 mark for the first time last summer, according to data from Kelley Blue Book. But by December, the average price had risen even more dramatically, to around $47,000.
With new cars proving so scarce, and so expensive, more car shoppers are turning to the used market. That surge in demand has led to a sharp 37.3 percent increase in prices. It doesn’t help matters that interest rates are absurdly low right now, making credit cheap and permitting more, higher-dollar car loans.
So what’s to be done? If you’re a collector looking for your next classic muscle car, or an off-road fanatic in the market for an old 4×4 to take on the trail, hold off. It’s a seller’s market right now, but it won’t be forever; eventually, supply will catch up to demand and prices should drift back down to more sane levels. If you’re on the hunt for a new daily driver, consider setting your sights low with the understanding that you can always resell your used car later to get the car you really want.
And if you’re holding onto a second or third vehicle that you don’t need and won’t necessarily miss, sell it. It’s impossible to know just when this overheated used car market will start its decline back to normalcy, but chances are good that the day of reckoning could arrive some time this year.