Increase in Used Car Prices Due to Covid-19

For the last several years, automakers have taken several actions in order to increase the prices and make more profit out of every sale in an effort to reduce their exposure to cars that offer less profit potential. In fact, large manufacturers such as Ford, GM, Fiat, and Chrysler have stopped the sale of numerous sedans; similarly, companies like Honda and Toyota have also reduced the sales of lower-priced vehicles. 

The global pandemic came to shake things up, starting with the way food is purchased all the way toward how people buy their cars and trucks with greater emphasis onlineThe global shortage of computer chips necessary for vehicles has had a significant impact on this matter. Due to the lockdowns and strict quarantine during the first few months after the virus started, the auto industry started to face some changes in their North American factories, the functioning and production of the industry also seemed to be affected by it. Because the production was inexistent or reduced for a period of time, the industry entered to a phase of very high-demand and lower supply which caused an imbalance within the industry. This has lead to a big jump in prices. In other words, too few vehicles while having too many customers.  

Since it is true that most people are shifting their lifestyles toward a larger emphasis of staying at home, many would infer that cars would not be needed as much. Howeverthe opposite trend has happening this year. The pandemic and importance of social distancing actually reduced the interest in public transportation, thus increasing the reliance on personal cars and trucks. Therefore, many of those who relied on public transportation had to look for other safer alternatives to go out and be socially distant with one other. Without a doubt, buying a car is definitely a covid-friendly transportation alternative.  

Affordability remains an issue for many. While used cars might be the solution for those who can afford new car, the availability of used cars needs to increase in order to meet up with the high demand. Unreasonable prices are expected to open the door to dealers that would focus and get profit from low-priced new cars specifically, vehicles that count with the basic features and nothing else. is noticing a trend where more people are utilizing the marketplace to find just the right car at the right payment level; one that they may not find at a dealer today. 

The Auto Industry Warns New-Car Buyers With Subprime Credit

How about good and suitable used cars? This is the invitation that the American auto industry has for those new-car buyers with a subprime credit score. Jonathan Smoke, chief economist for Cox Automotive Inc., at the American Financial Services Association annual Vehicle Finance Conference, on February 26 got to the conclusion that the new car industry niche is getting smaller over the time; it targets certain type of buyer and it gives a significant amount of attention into the credit profile of the prospective costumer. Although it is true that the business offers vehicle options from every size, color and design; subprime credit score will not be a beneficial aspect in any new car purchase, that is for sure.  

Smoke also talks about the commonly held belief that there is a new car for any budget or any situation; unfortunately, it is not as ideal as it sounds. In many cases, buying a brand-new car is not the best option and that is okay. Obtaining a used vehicle does not mean you are compromising quality nor safety; opting for secondhand cars can avoid stretching to stay up to date with unnecessary and unsustainable payment plans. 

According to Experian Automotive, all credit scores underneath six hundred are considered to be subprime. Over the pass of time, subprime customer numbers keep going down; in fact, today, that type of customer does not reach ten percent of the auto sales. At the same time, prices keep getting higher and the production of less expensive vehicles is decreasing. Cox Automotive stated at the online conference held recently “We essentially no longer have entry-level vehicles in the new-vehicle market.” Because of that, used cars are literally becoming the new entry-level vehicles, only those that are certified and are resold legally, of course.  

It is very probable that the global pandemic might have been one of the top influential factors in this change on the market; however, automakers are taking measures that are beneficial for them as a business, but also for the consumers that expect some needs to be fulfilled when it comes to buying a vehicle. Reinvention has been needed and most of the biggest automakers are still making decisions about the issue, some are still taking in the fact that subprime buyers could be out of the business.  

Credit history and performance will remain important, and it is imperative that any shopper on maintain the right amount of credit to take over an existing lease.