How insane is the used car market right now? A 2019 Honda Civic that was bought new for $21,000 just sold at auction for $27,200 (it has 4,000 miles) on it now.
The chip shortage has created a sellers-market for new and used cars.
Last month we discussed a 1993 Toyota pickup truck with 84 miles that was discovered in a New Hampshire barn that went for $41,500 at an auction.
“The 2019 Honda Civic that kicked off a used-car auction earlier this month would have been nothing special before the pandemic. But as automotive dealer Brad Wimmer watched, the online bidding quickly became, to quote him, “bananas.”
As a new car, the Civic would have had a sticker price of around $21,000. But within seconds at the wholesale auction, the two-year-old model, with 4,000 miles, sold for $27,200.
Soon after, a Nissan Rogue fetched what it would have cost new in 2018. A three-year old Toyota Camry with large dents and scratches on its hood sold for $14,200, nearly twice what it would have brought just a few years ago. And a 2015 Kia Sorento sold for $12,600, a staggering amount for a six-year-old car with 83,000 miles.
For Wimmer, owner of the dealer AutoLenders, such sky-high prices have become the norm at the weekly auction, where dealerships nationwide buy and sell used cars.
The unraveling of the used-car market is the most tangible result of a problem that has plagued the global economy for the past year: a dire shortage of computer chips that has hobbled auto manufacturing.
The lack of new cars hitting the market has caused a shortage of used cars, too, raising prices and crimping sales. The crisis has created a political headache for the Biden administration, fueling inflation and knocking more than two percentage points from GDP growth in the third quarter. It’s also hurting consumers, who face long waits for new cars and can’t fall back on the used-car market as a low-price alternative.
“It’s going to be really, really tough for consumers to buy a vehicle in 2022, a used or a new car. You’re going to have to pay a very high sticker price,” Wimmer said as he watched the auction, which used to attract more than 1,000 car dealers to Manheim, Pa., every week but since the pandemic mostly operates online.
Demand for chips, also known as semiconductors, is soaring as more electronic products require the components to function. The pandemic accelerated demand as consumers gobbled up new computers and household goods. But chip supply is limited by a lack of semiconductor factories and by the months-long process needed to make the components."