Used car prices have risen by 17 percent over the past 17 months, The Washington Post reports—More than any other commodity on the market. And it could very well indicate that inflation could weaken the economy.
A large part of the automotive sector’s problem is that the automotive industry has been fueled on a large scale as a result of the COVID-19 pandemic. There are no cars coming in, and no one is buying used cars. So used car companies started raising their prices as a way to boost the few sales they made. And when people got their incentive money and tax refund checks, the demand rose above the ability that many lots had.
With the entry into force of the new stimulus bill from the Biden administration, economists are worried that extra money will “overstimulate” the economy. Now I know a lot of people would call it stupid – the United States is still suffers from high levels of unemploymentt, so that people generally theorize that stimulus money will go to the essential. However, economists think they can use the history of the used car market to predict trends.
Here is more from the article:
Since the start of the pandemic, second-hand cars and trucks have experienced the fastest growth in the price of almost any category of consumer goods. data from the Neighborsau of Economic Analysis. The only categories that compete with each other are the main household appliances and ‘flowers, seeds and potted plants’, both of which caused prices to rise by more than ten per cent between February 2020 and January.
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Business owners like [Michael] According to Darrow, there is not much room to increase retail prices than they pay at the auction. The supply chain for new cars is limited by factory closures and continuous precautions to keep workers safe. And it is squeezing the market for used cars, which are heavily dependent on trade-in and auto parts. A global shortage of microchips is bulging the supply chains even more.
According to you, it is more expensive for dealers to repair and obtain their models, in addition to the extra cost of staying open in a pandemic.
Darrow does not think the price increases he sees can be sustained for long. Buyer knowsw the value of a car, Darrow said. Sometimes he wonders how long dealers will be able to pass on higher prices for cars and trucks before their customers walk away.
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Basically, economists are concerned that used car inflation could indicate a rapid rise in inflation, where the cost of everything can jump as much as 10 percent. The Federal Government intends to keep inflation at no more than two per cent per annum and has consistently fallen short – but the 17 per cent jump seen in the used car market is honestly quite disturbing.