The market for new and used cars is still tight
Gavin McGrath, general manager of McGrath Chevyland, stands next to a row of 2023 Silverado pickups at the dealership in northeast Cedar Rapids on Wednesday. McGrath said new vehicle inventories have not yet reached pre-pandemic levels and the market for used cars is tight, as fewer leases and rental cars entered that market during the pandemic. (Jim Slosiarek/The Gazette)
AJ Perez stands in the showroom of Deere Brothers Motors on March 8 in Iowa City. Dealership owner Perez said a shortage of new cars during the pandemic drove car shoppers to the used car market, which drove up prices. (Nick Rohlmann / The Gazette)
In the market for a nice old car? A newer model might be a better deal these days.
“Now, used vehicles are not cheaper than a new vehicle,” said Christophe Trappe, a car shopper from Marion. “Maybe I’m kind of cheap, but it looks like an old vehicle ain’t cheap.”
Added Jason Keawe of Kelowna, another car buyer: “If you find a vehicle with 30,000 miles on it, it’s almost the price of a new one. If you look at new, they want to increase the sticker price.” Are.”
For years, savvy shoppers have built their strategy around the assumption that a new car loses about 20 percent of its value in the first year and about 40 percent in five years. Bargain-hunters had a real chance at finding a late-model vehicle with relatively low mileage and some remaining warranty.
The count is among the casualties of COVID, though dealers and buyers feel the market may be turning towards the pre-pandemic normal.
Perhaps. to some extent.
“It’s been a crazy three years,” said AJ Perez, owner and dealer principal at Derry Brothers Motors of Iowa City. “On the new side there was product shortage with COVID and supply-chain problems. People who wanted something used it, and the value of the car went up.
AJ Perez, Deere Brothers Motors (Nick Rohlmann/The Gazette)
“This winter, we’ve definitely seen a little bit of improvement,” said Gavin McGrath, general manager of McGrath Chevyland in Cedar Rapids.
“Still, if you compare it to 2019 or pre-COVID, there is still really good value in used cars. I think (prices) will come back here at tax time and move through ’23.
Used car prices rose 45 percent in the year ending June 2021, according to Edmunds.com, which tracks auto industry inventory and pricing trends. Growth moderated slightly last year, with prices falling 8.8 percent through December.
“It’s still very much affected by the supply-chain issues that started in 2020,” said Jennifer Blackhurst, business analytics professor and supply-chain expert at the University of Iowa’s Tippett College of Business.
Jennifer Blackhurst, UI Professor
new car shortage
COVID- fuel disruptions have affected both the supply and demand for used vehicles. The pandemic shut down manufacturing in the automotive supply chain, cutting the supply of new vehicles by more than 10.5 million.
“Still short of a new car,” McGrath said. “You’d come here four years ago and pull up on our lot, and we’ll have 300 to 400 Chevys at any given time. We have 85 (now).
The uncertainty prompted rental companies to suspend purchases of new vehicles. This meant there would be less old fares going to auctions where many dealers list their own.
“The rental car companies fed the new car market, and the rental companies weren’t ordering new cars,” Perez said. “Not enough people were going on vacation for a while.”
McGrath agreed, “The rental car companies are a huge influence on used (vehicle) auctions.”
Leased vehicles, another reliable supply for used car auctions, also remain in short supply.
“When vehicles come on lease from leasing companies and banks, they typically run them through an auction,” Perez said. “Dealers were bidding on those cars.”
According to the US Department of Transportation’s Bureau of Transportation Statistics, new car leases are down by nearly a million to 3.2 million in 2021 after the start of the pandemic. Most leases last three years, so supply at auction is just starting to drop.
The inflated value of used cars has attracted speculators to the auction market, leading to a further increase in prices.
“You had people bidding on used cars that didn’t used to be in that business,” Perez said.
In addition, spot shortages of computer chips commonly used in new vehicles imported from Asia are expected to continue. This will force many new car buyers to buy used.
“Cars are basically computers with an engine and wheels,” said UI’s Blackhurst. “Chip makers are saying it’s going to be 2024” before supply stabilizes.
“There are different contractors and different types of chips running low at different times.” He said. “Tesla announced they are rewriting the software to use fewer chips.”
patience is important
Patience will pay off for buyers, said Alexander Rogers, a concierge at the online car-shopping service OneRequest. Based in Overland Park, Kan., the firm matches vehicles to buyers.
He said, ‘Those who are ready to wait, they have a chance. “Recently, we are getting prices on domestic closer to pre-pandemic. There are still categories of vehicles that are hard to find,” mainly the popular SUVs.
Cavey, who commutes once or twice a week from his home in Kelowna to his job at Collins Aerospace in Cedar Rapids, said he would like to find an electric or plug-in hybrid for the trip and a new Chevrolet Bolt. Considering buying.
“None have it in stock,” he said.
Jason Keavey of Kelowna stands with his Chevrolet Terrain outside Collins Aerospace on Wednesday in northeast Cedar Rapids. KV is shopping for a used electric or plug-in hybrid and is considering a new Chevrolet Bolt for his twice-weekly commute to his job in Cedar Rapids. (Jim Slosiarek/The Gazette)
A new Bolt typically takes six to nine months for delivery, which means the federal government’s $4,000 tax incentive for EVs under $25,000 could expire.
KV said he considered a 2-year-old Nissan Leaf with 250 miles of range, but with 40,000 to 50,000 miles on the odometer, “It ate up half the warranty. I’m really worried about repairs.”
“My strategy now is to wait outside of that (market) until a bolt comes along,” Kevey said.
Trappe, who works from his Marion home as a content strategist for a Utah-based consulting firm, is looking for a late-model SUV for his wife, who will later pass it on to their teenage daughter. Will give
He found a 2021 Chevrolet Trailblazer with 45,000 miles for under $25,000. A new Trailblazer LT is listed for just under $26,000.
“Why would I ever buy a used vehicle?” Trapp said. “Whenever we buy something, my guess is it will be a new vehicle.”
Christophe Trappe, Marion
Blackhurst, a UI professor, plunges into the car market herself, looking for a vehicle for the teen drivers in her home country.
“It’s hard to find something appropriate,” she said. “It will be better this year, but it won’t be back to normal until 2024.”
Collin Mulholland tightens nuts after putting the tires back on a Chevrolet pickup at Pat McGrath Chevyland’s Service Center in northeast Cedar Rapids. (Jim Slosiarek/The Gazette)
Donald Poulton tightens the plug on the oil pan after changing the oil in a Chevrolet pickup Wednesday at Pat McGrath Chevyland’s service center in northeast Cedar Rapids. (Jim Slosiarek/The Gazette)