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        home > news > Automobiles > Stratospheric Values for Used Cars May Mean Now is the Time to Buy a New Vehicle

        Stratospheric Values for Used Cars May Mean Now is the Time to Buy a New Vehicle

        Semiconductor shortage hammering vehicle inventories.

        Jim Stickford , Contributing Editor
        May 06, 2021

        The trade-in value of cars sky high right now — something for consumers who are considering getting a new vehicle to think about.

        Used car values are at unprecedented highs making now a good time to buy a new vehicle.

        According to Kelley Blue Book, thanks to a shortage of new-car inventory caused by, among other things, the ongoing semiconductor shortage coming at a time when consumer demand for new cars is growing, used-car trade-in values are better than they’ve been in years.

        Kelley’s figures show used-car prices are 18% higher than a year ago, said Kelley spokeswoman Brenna Bueller.

        That’s quite an advantage enjoyed by consumers who are also facing higher new-car prices. Simply put, vehicles that kept 55% of the original value are now going for 60% or 65%. Kelley figures indicate that these values are being driven by a relative lack on used vehicles in the marketplace.

        Fewer used cars available

        The rise is simple supply and demand economics. There are about 2.34 million used cars available in the U.S. While that sounds like a lot, it’s about 530,000 vehicles fewer that just a year ago, according to data from vAuto.

        auto shipping new york
        Production levels are down, which drives used car prices up.

        And that number is about 430,000 less than during the same time in 2019.

        Kelley analysts claim these numbers present a big opportunity for people thinking of selling or trading in their current vehicles.

        “There has never been a much better time to sell or trade in your car than right now during this strong seller’s market,” said Matt DeLorenzo, senior managing editor for Kelley Blue Book. “Dealerships are seeking more used-car inventory, and prices are reaching sky high. 

        “If you’re in a position to sell, it’s a great time to command top dollar for your old car. And if you’re trading in your vehicle to purchase a new one, the increased value of your used car will help take some of the sting out of the higher price you’re likely to pay when purchasing a car in these market conditions.”

        Consumer leverage

        Full-size pickups may be hard to find exactly the way a buyer wants one — and they’re pricey.

        All this gives consumers who want to buy a new vehicle a bigger advantage. 

        Prices of new vehicles are high right now. In fact, Edmunds.com analysts noted that 12.7% of all new vehicle buyers in April, paid more than the sticker price for their vehicle — the highest number the organization’s seen since it started recording the data in 2002.

        Thanks to COVID and the chip shortage, the supply on dealers’ lots is expected to remain low, keeping prices high. According to Edmunds data, new vehicle inventory at dealerships nationwide was down 48% at the end of April compared to a year ago: Inventory of trucks was down by 64%, SUVs by 44% and passenger cars by 42%. 

        Ford and General Motors officials warned during their recent earnings calls that the second quarter would likely be the most difficult of the year due to the chip shortage. This is going to test the resourcefulness of the most dogged buyer.

        “At the rate we’re going, it’s going to be a lot tougher for car shoppers to find exactly what they want this summer, so doing extra research online before you even set foot in the dealership is highly recommended,” said Ivan Drury, Edmunds’ senior manager of insights. “You might pay above list price and drive a bit farther to get the car that you want, but if you know you’re going to need a new vehicle in the next few months, definitely pull the trigger now before this situation gets any worse.” 

        Production cuts at places like Ford’s Chicago assembly plant due to the chip shortage may crimp inventory levels.

        But, as Winston Churchill once said, all things are in motion all the time.

        Change is coming — it always does

        But things will change. Those almost-completed vehicles sitting in automakers’ storage areas awaiting computer chips will eventually be completed.

        Then consumers will see a different situation, particularly OEMs with plenty of product they will want to move. So buyers who, right now, are considering good used cars — something they won’t normally do — will go back to looking only at new vehicles.

        Among the factors that will affect future demand is the COVID vaccination rate. As more people get vaccinated, more people will go out and about to buy new cars. Add to that government stimulus money. This will have an effect on the relative value of used cars in the marketplace.But knowledge is power. So before buying a new vehicle, Kelley analysts urge consumers to take the time to find out just what their current vehicles are worth in this particular time and place. Fortunately, there are resources available online, including Kelley’s own Blue Book website.

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