Skip to content
motorbeast logo
  • Audio
  • Batteries
  • Bikes
  • Autos
  • Parts
  • Questions
  • Roof Boxes
  • Scanners

How Auto Inventory Shortages Keep Pushing Consumers To Used Vehicles

Questions
Written BySteve Riley Updated on17/01/2023

How Auto Inventory shortages keep pushing consumers to used vehicles. Will the prices drop in 2023?

Used car prices

When Will Used Car Prices Drop

Since the beginning of the COVID-19 pandemic, new cars have shown an increasing shortfall in supply, causing prices to skyrocket. The shortage of some parts from China is a major cause for the shortfall in inventory: Automakers cannot build cars that they don’t have the parts to build.

Table of Contents
  • When Will Used Car Prices Drop
  • A Technical Cause
  • Record Turnover, Record Prices
  • Opportunities for Consumers
  • Conclusion

In addition, because the demand for cars is relatively inelastic (in many cases, people who need a new car need it now and cannot simply wait for the market to improve), low inventory of new cars continues to push buyers into the used market.

During the third quarter of 2022, the average price of a used car remained extremely elevated. The average used auto price in Q3 of 2022 saw an 8.59% increase year-over-year from Q3 of 2021, but a much smaller increase than the 21.37% increase in Q3 2021. Price increases peaked in Q1 of 2022 with a 40% jump versus the year-earlier quarter.

A Technical Cause

The auto industry has grown much more electronics-dependent since 2000. For example, a new car for the 2001 model year used a relatively small number of fairly simple electronic components, while its counterpart 10 years later had a highly complex and informative network including comprehensive infotainment features.

Car computers have also improved in complexity. In most cases, this is good: modern vehicle computers have made most engine control problems a thing of the past and simplified vehicle diagnostics. But it’s also made automakers more dependent on overseas computer parts than ever before.

Pandemic purchasing patterns also created significant pressure on chip demand. People working from home consumed more entertainment depending on electronics and needed new electronic devices to operate their home offices.

This worked along with the industry’s movement from 200nm to 300nm silicon wafers while the auto industry continues to use legacy 200nm wafers. However, far greater demand has been placed for 300nm wafers, and as a direct result, the industry has focused on building fabricators to create them. IEEE Spectrum commented on the shortage in November 2022.

Although these processes comprise 54% of current silicon manufacturing processes, they are considered mature. As a result, the electronics industry is not pressured to build new 200nm fabs, seeing them as less profitable than 300nm fabs.

According to Bharat Kapoor, lead partner, Americas, at Kearney, to end the parts shortage and prevent future shortages, the auto industry must develop deeper relationships with the chip industry to clarify the connection between supply and demand for both sides.

Record Turnover, Record Prices

In the year-ago 1st Quarter of 2022, used car sales were at an all-time high, with average vehicle prices reaching an all-time high of $28,000. Many industry experts were astonished by these numbers, as the used-car price benchmarks set in Q1 of 2022 were comparable to new cars just before the pandemic. The lack of new stock was partly to blame. Buyers of new cars can only buy if the vehicles are there.

Over the second half of 2022, used car prices declined 16% from their highs in Q1/Q2 as consumer prices followed wholesale prices. Although inventory shortages are beginning to improve and lots are returning, low new-car inventory remains a challenge for dealers.

Projections indicate that the first quarter of 2023 should see used car prices continue to decline and new car inventories continue to be rebuilt. Average prices, however, should remain above historical averages for most of 2023. For example, used sale prices among cars.com dealers were 25% above their long-term average of $18,321 as of November 2022.

Opportunities for Consumers

Consumer opportunities are relatively slim but improving in this environment. Because of low inventory and high demand, vehicles in the first half of 2022 often stayed on the lot for averages of 30 days or less. In some states, the average was fewer than seven days.

As of November 2022, the average had increased to 46 days, at the low end of the longtime average of 40-60 days. Additionally, because of that improved inventory, customers are more likely to be able to find the vehicle that fits them rather than settling for whatever is on the lot.

One issue that will continue to affect inventory, and put a damper on improving price trends, is dealer reluctance to sell at a loss. Inventory purchased at a higher price in 2021 and 2022 will be difficult to move at that higher price point.

“Car vending machine” Carvana is in particular trouble, as their policies led to inventory being purchased at inflated prices in the latter half of 2022. They are reluctant to sell vehicles they can’t profit from, leading to used vehicle prices dropping more slowly than wholesale prices, which, as stated in the above section, have been going down since late 2021.

Used vehicle sales should continue to decline, having declined 10% from year-ago levels by November 2022. However, this is a positive sign of increasing inventory levels since a major driver of record used-car sales was buyers being forced into the used market by a lack of stock on new-car sales lots.

Conclusion

2023 offers challenges to buyers and sellers of cars that will continue to push buyers into the used market. Average new-car prices continue to be elevated as the stock remains consistently low. Dealer stock is expected to remain below average for 2023, increasing only 3% from year-ago stock levels.

The global chip shortage that began in 2020 is a primary cause of the shortfall in new stock. There is an expectation. However, auto prices will continue to recede over 2023 as inventory levels return closer to pre-pandemic norms, allowing customers forced into the used-car market due to a lack of available inventory to return to buying new cars.

Large used-dealer networks like Carvana are reluctant to sell vehicles acquired at high prices for a loss, which is challenging for customers.

Automotive Marketing sponsors this automotive news story. The leading automotive digital marketing company.

Post Views: 47
Post Tags: #Used Car Prices
Can you fix that rattling sound from your door by properly...
Can you replace a CVT transmission with a regular transmission? In...

Car Vacuum Cleaner

SaleBestseller No. 1 ThisWorx Car Vacuum Cleaner - Car Accessories - Small 12V High...
ThisWorx Car Vacuum Cleaner - Car Accessories - Small 12V High...
$28.67
Buy on Amazon Price incl. tax, excl. shipping
Bestseller No. 2 Hand Held Vacuuming Cordless Rechargeable-10K PA Strong Suction...
Hand Held Vacuuming Cordless Rechargeable-10K PA Strong Suction...
$49.99
Buy on Amazon Price incl. tax, excl. shipping
SaleBestseller No. 3 IMINSO Handheld Vacuum Cordless Car Vacuum with 9000PA,...
IMINSO Handheld Vacuum Cordless Car Vacuum with 9000PA,...
$45.99
Buy on Amazon Price incl. tax, excl. shipping

Last update on 2023-01-09 / Affiliate links / Images from Amazon Product Advertising API

Honda vehicles are globally respected because these cars are very powerful,...
autel-md802
Autel MD802 vs. MD808 For most automotive repair shops and car...

Affiliate Disclosure

We are an affiliate. We hope you like our recommendations! Just so you know, we may collect a share of sales or other compensation from the links on this website. Thank you for using our links, it helps to grow our website.

  • Privacy Policy
  • Affiliate Disclosure
  • Contact Us
  • About Us
  • Cookie Policy
  • Privacy Statement

© 2023 MotorBeast Motorbeast.Org

MotorBeast
error: Content is protected !!
Manage your privacy

To provide the best experiences, we and our partners use technologies like cookies to store and/or access device information. Consenting to these technologies will allow us and our partners to process personal data such as browsing behavior or unique IDs on this site. Not consenting or withdrawing consent, may adversely affect certain features and functions.

Click below to consent to the above or make granular choices. Your choices will be applied to this site only. You can change your settings at any time, including withdrawing your consent, by using the toggles on the Cookie Policy, or by clicking on the manage consent button at the bottom of the screen.

Functional Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes. The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
Statistics

Marketing

Features
Always active

Always active
Manage options Manage services Manage vendors Read more about these purposes
Manage options
{title} {title} {title}
Manage your privacy
To provide the best experiences, we use technologies like cookies to store and/or access device information. Consenting to these technologies will allow us to process data such as browsing behavior or unique IDs on this site. Not consenting or withdrawing consent, may adversely affect certain features and functions.
Functional Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes. The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
Manage options Manage services Manage vendors Read more about these purposes
Manage options
{title} {title} {title}
Scroll to top
  • Audio
  • Batteries
  • Bikes
  • Autos
  • Parts
  • Questions
  • Roof Boxes
  • Scanners
Search