The used car is a hot commodity in the US right now. From June to September, the typical cost of a used car soared by 15%. The increase is so dramatic that it’s had a major impact on the government’s inflation numbers.
The US Bureau of Labor Statistics reported overall inflation grew 0.2% from August to September. Yet without the increase in used car prices, there would have been no inflation at all.
Even with higher prices, sales of used cars are strong. In August, they were at about $12 billion, almost $1.6 billion higher than at the same time last year.
There are three main factors driving the demand and higher prices for used cars, all having to do with Covid-19. First, economic uncertainty tends to drive consumers towards used cars—a big investment in a new car during a recession just doesn’t make sense when your job feels tenuous. Second, many essential workers who would normally use transit are opting to get a car out of fear of contracting the virus on public transportation. Finally, factory shutdowns in early 2020 limited new car options, leading more consumers to look to the used market.
With Covid-19 continuing to ravage the US, there is little reason to think these trends won’t continue. Sky-high used car prices will likely be the norm for the foreseeable future.