If you haven't heard about it yet, used car prices are crazy today. It is almost impossible to buy a new car on the spot. There are either long wait lines for delivery, or everything you see in both the parking lot and the showroom of a dealership is already sold. Yes, the semiconductor shortage (plus many other supply chain issues) has brought the auto industry to his knees. Although it is expected to balance out by early 2023, then we need to focus on the only thing that is available out there: used car.
Used Car Prices
As I said at the beginning of this article, chances are you have seen this. Used car prices are no sense since June 2021. According to CarDealershipGuy, the current range of pricing for used cars is as follows:
- Cheap cars (< $20K) are overpriced
- Expensive cars (> $30K) are risky and depreciating quickly
- Average cars ($20K to $30K) are the best value right now
Just see this crazy Jan 2022 auction price for a 2008 Kia Optima:
2008 Kia Optima.— CarDealershipGuy (@GuyDealership) January 14, 2022
153k miles. As-is.
2 years ago: $1,500
12 hours ago: $6,400
Makes sense. pic.twitter.com/vdm2rdq19u
That tweet by itself illustrates a lot. The lack of supply has skyrocketed used car prices, even those that are even close to scrap price.
Will this last forever? For sure it will not. What is a problem for someone, is an opportunity for someone else. Although COVID-19 pandemic reconfigured the way modern civilization consumes and supplies itself, thousands of new companies are filling the gap and catching up with the current supply chain demand.
Could prices have peaked in January?
According to Manheim Consulting, a U.S. company that tracks million of U.S. used vehicle transactions per year, mainly on the wholesale sector, used-car prices have declined 4 consecutive months for the first time since May-June 2021.
Manheim Used Vehicle Value Index. Mid April 2022
What Should I do Then?
Here comes the tricky question, then. What should Canadians do under this environment? Well, it will adjust to the current scenario, but ideally, you should WAIT. Yes, not a good moment to make a move.
- If you have a car and NEED a car: Keep it. It is not a good moment to flip.
- If you have a car and do NOT need it anymore: Sell it for a profit. Don’t rush. Dealerships are willing to pay a lot right now.
- If you NEED to downsize/upsize: Try to trade at a dealership, avoid selling it and then buying.
- If you have a lease nearing the end of the term: You should probably buy it or use it to negotiate the next lease.