Used car prices rose more than 35% in Las Vegas in February as the broader auto market was hit by global supply chain issues.
Market analysts say strong demand for new cars combined with a reduced supply of computer chips used in new cars is eventually trickling down to even the oldest used cars for sale, driving up prices because someone one will be willing to pay.
Automotive research and search engine site iSeeCars found used cars were around 35.6% more expensive in February compared to the same month in 2021 – on par with the national average of 35% according to the analysis of the site. That’s an average price increase of over $8,000.
“When you can’t buy a new car, what do you do? You keep your current car, which causes a used car constriction,” said Karl Brauer, executive analyst at iSeeCars. “If you keep your used car, companies and dealerships that have traded in used cars for new cars now stop sourcing used cars.”
The problem is not unique to southern Nevada. Edmunds, a car buying guide site, found that the transaction price of a new car was up 12.7% year-over-year nationwide. Rising new car prices and limited supply are driving up the average transaction price of used cars, sometimes at prices that don’t reflect vehicle depreciation and “defy logic,” said Ivan Drury, chief information officer at Edmunds.
In February 2021, the average transaction price for a 7-year-old used vehicle was $15,638, according to Edmunds analysis. Last month it was $22,584, an increase of 44.4%.
“People are all fighting for the same wares,” Drury said. “When several people raise their hands and say, ‘Hey, I want to buy it. Whether it’s a new car or a used car, I can’t fault the seller. If they charge more, it’s only because there’s someone else saying, “I’ll pay more.”
In Las Vegas, sellers have noticed the problem for a few months. Used-car dealership Baja Auto Sales West had a fleet of 2019 Nissan Sentras selling for about $16,000, “like hot cakes,” sales manager Miles Gonzalez said. When they came back to auction several months later, they couldn’t buy the car for less than $20,000.
Gonzalez said the dealership at Decatur and Charleston Boulevards specializes in offering low-capital loans or working with customers with bad credit. It may be more difficult for a client to qualify for loans with certain monthly payments.
“When someone comes in with little money or not-so-good credit, a $14,000 or $15,000 car is basically what we’re looking for,” Gonzalez said. “Now the car is 10 years old and the bank doesn’t look at it the same way.”
For customers, it makes shopping and shopping more difficult, he said.
“If it’s their first stop, they’re going to think we’re lying,” Gonzalez said. “And after a few stops, they might think, ‘I’m not buying a car right now. “”
Analysts suspect the problem will persist, possibly until 2023. Sellers will have to deal with the growing backlog of demand as vehicle production ramps up.
“We don’t see that new car inventory coming back as usual until the end of this year,” Drury said. “Even then, we’re not talking about those blowout sales where the dealers have the hot dogs and the bounce house for the kids. It’s not going to happen. There are still so many people today who order cars, who buy them without seeing them. There are so many requests that we won’t be able to fill anytime soon.
Brauer recommends in-market consumers with a specific budget to consider expanding their search area and reducing brand loyalty. A trip out of the region might cost $1,000, for example, but bring back a car that’s $3,000 cheaper than local sales.
“The average person would probably look in their local town like they always have in the past for their next used car,” Brauer said. “One of the best ways to increase your chances of finding the car you want and/or at a price you want is to broaden your geographic consideration. That’s what I tell people, that’s the flexibility not only on the car you want, but also on where you pick it up.
McKenna Ross is a corps member of Report for America, a national service program that places reporters in local newsrooms. Contact her at email@example.com. To follow @mckenna_ross_ on Twitter.