From the Chattanooga Times Free Press: A new study shows used car prices, driven by the lingering effects of the pandemic, have soared nationally
From the Chattanooga Times Free Press: A new study shows used car prices, driven by the lingering effects of the pandemic, have soared nationally and in Chattanooga.
According to auto research website iSeeCars.com, the average cost of a 3-year-old car in Chattanooga was $22,000 in 2019, but now the price has climbed to $33,000. That’s a 50% change, the study shows.
Also, while the price of a 3-year-old Hyundai Elantra was $12,000 in 2019 in Chattanooga, that sum today will get a buyer a 10-year-old Elantra, the study indicated.
“It’s a big shift,” said Karl Brauer, executive analyst for iSeeCars.com, in a telephone interview. “We haven’t seen anything like this before.”
Brauer said plant shutdowns and limited new car production during the pandemic are still playing havoc with the used car market.
“It has pushed people to pay more for all used cars,” he said. “It has pushed people to buy older used cars.”
James Berry, a car buyer from outside of Murfreesboro, Tennessee, who recently bought a used Toyota RAV4, said he noticed the price for the popular SUV had jumped much more than the model had sold for in the past.
“That’s why I try to bring cash to the table,” Berry said in an interview in downtown Chattanooga, noting that tends to help him bargain for a lower price.
As new car prices rose amid the pandemic, used car costs followed, said Brent Morgan, president of Integrity Automotive Group in Chattanooga.
“Supply and demand came into play,” he said.
Morgan said while the pandemic cut into the number of new vehicles coming to the marketplace, there was also a shortage of leased and rental cars that dealers typically would see.
“They didn’t have that in the supply chain,” he said. “That again caused valuations to increase even more.”
According to iSeeCars.com, which analyzed 21 million used cars sold nationally, the same budget that allowed consumers to buy a 3-year-old car in 2019 will only buy a 6- to 10-year-old version of the same model today in the United States.
Also, the average age of used cars in the U.S. has increased from 4.8 years in 2019 to 6.1 years in 2023. That’s while the average price across all car ages increased 33%, from $20,000 to $27,000, the study shows.
Brauer said the issue of high prices isn’t going away any time soon and will likely affect costs for years to come. He compared high prices caused by a scarcity of vehicles to how snakes digest big prey over time.
“It moves down the body,” he said. “It has to move through the whole system. It won’t just go away.”
In addition, high prices hurt lower income earners who typically buy economy cars, Brauer said.
Morgan said that in Chattanooga, there are positives in the economy, and Integrity officials are seeing a percentage of buyers moving up to slightly nicer preowned vehicles, which are better reconditioned and offer enhanced warranties. Those factors take some concerns and risks out of the car purchasing equation, the auto dealer said.
Like for new vehicles, demand for used cars has remained strong despite higher prices, he said.
“It’s still a great option from an affordability standpoint,” Morgan said.
In the first nine months of 2023, the number of used cars and trucks sold in Hamilton County was down only 4.1% from the record high reached in the previous year, according to Hamilton County vehicle registrations. Even with higher prices per vehicle, the number of used vehicles sold so far this year in Hamilton County is 5.2% ahead of the same period in 2021 and is 8.6% above 2020 levels.
The United Auto Workers strike against the Big Three automakers in Detroit could start crimping sales of new vehicles, said Jessica Caldwell, head of insights at the online auto resource Edmunds.
“Right now, the effects are limited, and third-quarter sales were left unscathed,” she said in a statement. “However, the landscape can change dramatically, and quickly, if the strike continues.”