Due to the shortage of microchips, new cars are scarce. Individuals who resell their car do good business.
Sell your used car at the same price, or even more expensive despite a higher mileage? This is the unprecedented consequence of soaring prices in the United States. “It’s a totally new trend” which is not about to stop, estimates Aurelien Guillaud, owner of Arlington Auto Group (AAG), a car dealership based in Arlington, Virginia. “My car was sleeping in the garage of my apartment, so it was in good condition. But it shocked me to see that its price was higher than that of four years ago”, told AFP Masaki Kondo, an expatriate Japanese journalist who sold his Chevrolet a few months ago to the same dealer in Gaithersburg (Maryland), for 62,000 dollars, or 2,000 dollars more than when purchased.
Consumer prices soared in 2021 in the United States, +7%, unseen for almost 40 years, fueled by the rise in prices for used cars and trucks even more dizzying (+37.3%) . Since the pandemic, automakers have struggled to get their hands on some parts, especially computer chips imported from Asia, slowing production of new vehicles. With the shortage of new cars, there has been an influx of demand for used cars, says the Arlington dealership. Car rental companies, unable to acquire new vehicles, stopped quickly disposing of their old cars, drying up the market for used vehicles and pushing up prices further.
Hence a tempting offer for Masaki Kondo’s Chevrolet. By buying it back from him, the Gaithersburg dealer told him that he would have no trouble reselling it for $74,000 given the demand. “If we compare to a year ago, we buy the same car for 20,000 dollars instead of 16,000 dollars and we resell it for 24,000”, explains Eddy Malikov, the manager of AAG. Outside in the parking lot, about 40 cars are waiting for their new owner, not so bad considering the situation. And business should continue to roll as recent strict lockdowns in China to contain the Omicron variant exacerbate the chip shortage, pushing the influx of new cars to a more distant horizon.
A collapse in sight
In the United States, the appetite for used vehicles is also explained by the fact that Americans are increasingly reluctant to take public transport due to the unending pandemic. “Elsewhere in Europe, people will buy a scooter or a motorbike. Here, it’s the car because of the distances to be covered», observes Aurelien Guillaud. So the prices go up. “We have a client who bought his car for $21,000 in 2019, who sold it for $21,000 two years later with 10,000 miles. (16.093 km) Moreover”, says Eddy Malikov. So that inspires some. “I look on the forums, (…) and there are people who recognize buying a car to resell it in two weeks”, “It’s a way for people to make money”, notes Aurélien Guillaud. But he warns against this practice because in Virginia, individuals are allowed to buy and resell at most 5 cars per year.
In a recent study, the firm KPMG points out that the boom in the used car market will probably be followed by a collapse. “History teaches us that the current frenzy of the second-hand market will eventually come to an end”, write the authors, emphasizing that chip shortages and supply chain problems will subside. “The powerful industrial machine will return to full throttle and the car parks of dealers will once again be full”, they say. So the market goes “collapse”, they add, predicting a 30% drop from today’s level. They acknowledge, however, that it is difficult to know when this could happen and if the drop could be “steep or slow”.
In a sign that manufacturers seem to be betting on a boom that will last for a while, General Motors announced on Tuesday its intention to launch CarBravo, a new online used-vehicle marketplace for GM-branded vehicles, to compete with dealers. online such as Carvana and CarMax.