A new report published by multinational financial firm KPMG indicates used car prices could decline by 30 percent in the near future as the effects of the global chip shortage wanes.
The KPMG report predicts chip suppliers will eventually catch up with demand for new vehicles, allowing automotive manufacturing to shift back into high gear. If this happens, KPMG believes the used car market “could collapse,” sending average used car prices plummeting by about 30 percent from today’s elevated values.
“Normally, when the market senses that automakers are once again able to produce a normal supply of new cars, we would expect equilibrium to be restored and used-car prices would normalize, the KPMG report said. “That implies a reduction from current price levels of roughly 30 percent.”
While elevated used vehicle prices have caused stress for many Americans, a sudden crash in used car prices could also spell trouble for the average working-class family. KPMG says that roughly 17 million consumers currently own “vastly overpriced used vehicles,” and that many of these purchases were finances, leading to potential risks in the auto lending business. Dealers would also be stripped of some profit as inflated prices normalize, which could cause financial strain among auto retailers, as well.
The report said future used car valuations depend largely on inflation. If price inflation continues, this could create a “new floor,” for used vehicle values, KPMG explains, which would ensure used vehicle values remain elevated almost permanently. If interest rates are raised to lower inflation, consumer demand would decrease and cause used car values to plummet.
The average transaction price for a used vehicle in the U.S. last month stood at $27,569 – a 27 percent increase year-over-year. While used vehicle demand slowed in the latter half of 2021, prices are expected to remain elevated throughout 2022 as the effects of the global chip shortage persist.
The KPMG report also indicates chip supply issues could remain as they are until at least mid-2022, but notes full supplies of semiconductors may not be available until well into 2023 – a sure sign that elevated used vehicle prices will remain for at least another 12 months.
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Comments
Dealers always make out well ripping you off when you trade in your used car. No sympathy.
Trade-in and not get a good price.
OR
Sell private and deal with tire kickers, no shows, and dicker-ers.
If you get a trade-in value within 15% of what it’ll turn around and sell for on the used market for that’s a fair deal. Negotiate the new vehicle and find a balance.
I’m in transportation now, but owned a transmission shop previously and was a service mgr at dealerships and before that was in car sales. People who don’t understand the car business typically feel that way, but the truth is no one makes you accept the deal they offer, you can say no. It is your responsibility to know what you are doing when it comes to car values, not theirs. They operate on commission, they can ask whatever they want for a car, it belongs to them. You can say no, I have many times and left dealerships without a car, only to continue to look and find the deal that I want elsewhere. If you take the time to do your homework you will never be ripped off. That is coming from 25 years in the car business and having a love of cars, I have bought 51 cars in my life and have never bought a bad car. I did overpay on a few of the first newer cars I bought, but I learned fast. It’s a game and you just have to know the ground rules.
so you are basically agreeing with people who say dealers will screw you if given the chance.
it’s a business, go into anything with your head in the clouds and you’ll get fleeced. it is your own responsible to pull on your big boy pants. you can hire consultants to help you purchase a vehicle if you’re back is made of a wet noodle.
To bad the crappy cowardly dealers can’t be cut out like Tesla did. Crazy it’s almost 2022 and you still have to deal with a dealer.
Be glad you have dealers. They do the service and without them you are screwed for repairs. I would never buy a car online that’s not a dealer. My dealer has a loaner car if I need over night repairs. Think twice they are in business to make money and it takes alot of money just for the special tool they need to keep these cars repaired.
No I will stick with what I originally said thanks. If certain laws were not in place dealers would of been gone so think on that.
I wonder how Tesla handles warranty repairs without a dealership network? I, for one, don’t use a dealer for normal routine maintenance service, but I most certainly do for warranty work (including getting a loaner car when my car is in for warranty work)
Spoken like a true dealer. Most dealers mark genuine car parts up by 200%. One can easily go online an buy genuine parts at cost + 10%. Car dealerships should make money. Any business that is ran well should. Businesses that fleece customers at every turn will soon be out of business.
Lol what kind of dealer did you used to work at. We sell genuine parts at MSRP or a cost-plus basis, generally 10%, to remain competitive. Not sure in what planet any dealer is making a business selling parts at 200% markup.
Positives and negatives to each
Tesla is certainly N0T innocent. Tesla has steadily increased prices since the end of 2020 Just like everyone else. Makes no difference to the customer weather the money goes to a Dealership or to the Manufacturer.
It makes a lot of difference what are you talking about? Tons of people want dealerships gone tons of people wanna buy straight from the manufacture. Check other websites besides here trust me it’s flooded with people wanting this. Like I said above certain laws are the ONLY thing stopping this from happening.
You obviously have no negotiation skills. Car dealerships, they’re not a nonprofit organization. Just like any other business their there to make a profit. And to be honest the selling part is a very small portion of that. Where they make the real money is in service. So if you are scared to ask for what you think is fair maybe you should let your wife buy the vehicle!!!
I’m a fan of Tesla, but their sales policy is not consumer friendly. The factory direct “savings” don’t go to the buyer, they go 100% to Tesla. No negotiation.
That said, their cars are great a way ahead of others.
And the buyer will screw the dealer if given the chance. Don’t be a hypocrite.
That’s right the house always wins. Prices are inflated by the dealers to gouge customers. Always been always will be.
Clearly you don’t understand basic economics and are certifiably insane if you think that thousands of dealers across the country have somehow coordinated to ratchet up prices without their costs of acquisition and maintenance going up at all. Go into a restaurant tomorrow and notice how the burger that costed $8 last year is $13 now, then thank the politicians running this country.
We still want you guys gone you suck dealerships have always sucked you should thank those politicians for having laws that keep you guys in business. Luckily with the new ev companies we don’t have to worry about you crappy dealerships I hope ford, gm and ram can make those laws nonexistent so you guys can close permanently.
Don’t worry, we’ll still be here. Prices will just be non-negotiable, like McDonalds franchises. I think we’ll both thoroughly enjoy that.
You’ll still be there because of the very politicians you criticize are the only ones protecting you. All the big auto companies wanted and still do want to do a direct to consumer sales but the laws say they can’t Because the dealers lobbied the politicians. Maybe you are a good salesman or whatever role you play at the dealership you are at but majority are pure trash.
Thanks to Tesla the laws have been changed in most states to allow direct-to-consumer, including my home state, yet we’re still here. Contrary to what you think, the big three don’t have the will to assume the entire business of selling vehicles, at least not any time soon. They’re “automakers” in their mind, hell they barely do more than assemble all the pieces made by thousands of different suppliers.
Totally agree with Tony. I ‘ve negotiated many purchases for friends, family, even my mother-in-law a few times. People just seem to get overwhelmed when they go into the dealership. It’s all due to lack of preparation and research, most people just don’t want to spend the time. If you walk into a dealership without knowing their cost for the vehicle( optioned the way you are buying it ), you’re totally at their mercy.
Bubble on used car market bursting ?
Well, maybe when I start seeing inventory on dealership lots. My closest GM dealer who usually has 300+ vehicles on their lot might have 40. Those 40 vehicles are all selling at or above MSRP and people are still ordering with 12month wait times. It’s going to take quite some time for the trade in market(used car) to fully get back to where it was.
Supply and demand… “C’mon fellas, it’s all ball bearing nowadays”
Happy New Year !
Vultures, it be wise to keep your car for another year or so.
You saw them flying above to lol.
Price will be based on supply and demand.
As for dealer. I have had some that were right up fair from the get go. Others that pull all sorts of crap. It is upon the buyer to know what they should pay and it is upon then to know what their trade is worth. With the web today it is pretty easy to find the info needed with a little home work.
It is upon the buyer to make a good deal. If not walk away. Many fail to do this. What some dealers may do may not be moral but it is not illegal. It is kind of like life.
I have noted some of these national companies buying cars are paying fair value for a trade. How they are doing it is buying at a good price in lower demand areas so the seller gets a hood price for his area. Then they ship the cars to an area where demand is higher and they make more on resale.
Still the best if you have a good car is private resale but depending where you live is to how safe that is anymore.
They use new MBA grads that know little about cars doing a report on Used car prices. EY, Deloitte, KPMG are cancers to this sector. You can blame them for the failed Direction GM is heading toward when it comes to performance trucks and SUVs. GM hires them to do reports on what beans to count and what to axe. Ie Sports Coupes in the industry are selling less and less, here’s a plan to kill the Camaro by building less and less, having dealers NOT order more, and “justifying” on paper that hey look the sales numbers have been getting lower and lower! We need to either redesign or axe the car! As the case for Buick killing off the US Sedans
Amen.
Brandon will never let it happen!
#FJB
One thing that bothers me is the tack-on of “administrative Fee” of $799.00 to process the sale and secure title and plates. I checked and in VA there is no set max that can be charged but recommended is $250.00. Then there is the $450.00 charge for “Dealer protection package” that gets placed on the car without your permission. Like said above let the buyer beware.
None of this bothers me as if they don’t drop it I walk.
Since you can shop dealers on the web it makes finding a car and better dealer much easier.
Also if you have a good dealer get the to do a dealer trade with what you found else where.
Great story. Though I must say, “Frack KPMG and the 🐐 they rode into town on.” They will sell their souls for the right price.
Its not just the chips. Electric cars are about to dominate the market destroying the used market for most petrol, LPG and diesel cars. IMO only special cars will survive. The ones that have captured the public imagination because they are extra luxurious, exciting or have a special application like offroad capabilities. Most current commuter cars will plummet in value and fade away.