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Out-Of-Control Car Prices Are Real And Cutting Into Sales
Out-Of-Control Car Prices Are Real And Cutting Into Sales-September 2024
2024-02-19 EST 22:09:30

EL CERRITO, CALIFORNIA - MARCH 15: Used cars sit on the sales lot at Autometrics Quality Used Cars on March 15, 2021 in El Cerrito, California. Used car prices have surged 17 percent during the pandemic and economists are monitoring the market as a possible indicator of future increased inflation in the economy overall.

If you’re waiting for car prices to cool down, you’re not alone. Sales are down for the second month in a row here in the U.S. as dealers continue to push past MSRP.

There is a lot going on in the world of cars at the moment. On the one hand, there’s plenty of pent-up demand from Americans who didn’t buy a car during the quarantine and lockdowns of 2020. On the other hand, there is little supply to meet it. A global semiconductor shortage has been hurting the auto industry in the worst way, as even those semiconductor chips that are getting made are going to tech companies. Carmakers cut their orders at the start of the pandemic and are now last in line for an already diminished stock of chips.

This is to say that everything is conspiring to pump up car prices new and used. Now it’s just reached a boiling point, as the reports:

Imported vehicle sales fell 13.1% from the previous month while domestic vehicle sales also declined, down 8.7% overall as auto sales shrank 11.2% and truck sales fell 8%. The declines dragged car sales to below their pre-pandemic level.

“Vehicle sales have contracted for two consecutive months as extremely high prices, particularly for used cars, is cutting off demand,” Oxford Economics’ Mahir Rasheed said in a research note.

We’ve been writing about the unhinged demand for cars for weeks now, and nothing about this news of a sustained drop in sales surprises me. I was just writing about car dealers fighting with regular buyers to and my coworker Erik Shilling was cataloging dealers . On Thursday we detailed how dealerships are simply citing the Wall Street Journal. Sales were looking good for the quarter overall, but analysts were expecting a slowdown, as the WSJ explained:

The rate of sales slowed considerably at the end of the second quarter, falling to an annualized selling pace of 15.4 million, according to research firm Wards Intelligence. That is down from April, when the industry was on pace to sell nearly 19 million vehicles for the year. The industry tracks the annualized sales rate as a measure of market strength from month to month because it strips out seasonal factors.

Analysts attribute the deceleration to withering dealership inventory. Dealers started June with about 1.5 million vehicles on their lots or en route to stores, down 42% from the same time in 2020 and down 23% from the start of May, according to Wards Intelligence. The diminishing selection is driving prices to record highs.

I don’t know if the problem is necessarily that prices are high in general. Car prices have been on the rise for years now. They crested $40,000 in 2020, as , but it almost felt like old news. In 2019, breathlessly about car prices hitting an “all-time high” of around $36,000, up nearly 30 percent from the same time 10 years prior. Americans are no stranger to car prices creeping up. What feels new is so many dealers asking thousands over sticker price for cars. Higher prices in general we all sort of know is inevitable. Getting asked over sticker feels like something we can wait out.

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