Low used car inventory brought on by rising demand amid the COVID-19 pandemic is helping to drive up prices of second-hand motors in the U.S.
Used car inventory in the U.S. totalled 2.34 million vehicles at the end of March, according to data compiled by Cox Automotive – down from 2.86 million at the same time last year.
Used vehicle lots in the U.S. had a total days supply of 33 in March, down from 48 days in January and February. The days supply of used vehicles in the U.S. remained stable throughout 2020, but have now begun to dwindle rapidly as consumers received their tax refunds and stimulus checks.
In turn, the average listing price of used vehicles was comparably high throughout March at $21,343 – up 13 percent year-over-year. Used vehicles with a listing price of under $10,000 had the lowest supply at 23 days, Cox Automotive says, while vehicles in the $10,000 to $25,000 range had at or slightly below average inventories.
A multitude of factors are driving an increase in used vehicle sales, as well as higher transaction prices. For starters, the COVID-19 pandemic may have driven some Americans to avoid using public transit or services like Uber for safety reasons, convincing them to purchase a cheaper used vehicle instead. Additionally, production setbacks caused by the pandemic last year lead to a shortage of new vehicles, which may have driven some consumers to shop on the used market or hold onto their existing vehicle instead of buying a new one.
The ongoing global semiconductor shortage may also be influencing used vehicle sales and causing low used car inventory. The semiconductor shortage has caused further new vehicle inventory shortages throughout the first four months of 2020, which could be convincing motorists to either hold onto their current vehicle for the time being or to shop on the used market for the vehicle they were looking for.
George Arison, Co-CEO of used car shopping site Shift.com, told Yahoo Finance last month that used vehicle sales have been propped up by stimulus checks, though the upward trajectory will likely continue as the economy picks back up post-pandemic.
“I think the checks that have gone out, stimulus checks, are really helping consumers, obviously, and generally, when people get disposable income, they tend to put it towards some large purchase, like buying a vehicle,” Arison explained. “So I think that’s really great, and we’re also seeing really good momentum with the economy overall.”