As 2021 came to a close, the average used car in America sold for $28,205. That’s 28% higher than it was just one year before. It’s a shocking 42% higher than in December of 2019, the last month before the first confirmed case of COVID-19 in the United States.
However, hidden in the data may be good news for car shoppers. The supply of used cars available for sale has begun to creep up, though it remains below pre-pandemic normal.
Car dealers measure supply in a metric they call “days of inventory” – roughly, how long it would take them to sell out of cars at today’s sales rate if they didn’t acquire any new ones. The nationwide average inventory at the end of December reached 51 days. That’s the first time since January 2021 that the number has moved over 50.
In December of 2019, before that first COVID-19 case, it stood at 76 days.
How We Got Here
Several factors combined to push used car prices higher last year.
As vaccines became widely available, America began to pull out of the economic downturn spurred by the pandemic. Moving again, Americans sought to buy cars.
But a worldwide microchip shortage left automakers unable to build new cars fast enough to meet demand. They used the chips they could get to build their highest-margin vehicles, meaning there were few inexpensive new cars on dealership lots.
The average price Americans paid for a new car spiked — reaching over $47,000 in December.
That pushed many would-be new car buyers onto used lots.
The low-priced end of the used car market faced its own problems. Automakers had built fewer cars for several years after the 2008 recession. That left few of the higher-mileage, older cars dealers typically sell for $10,000 or less on the market.
With inexpensive used cars in short supply and buyers coming to used car lots with the sort of budget they’d ordinarily bring to a new car purchase, prices soared.
Change Coming Slowly
Those conditions are changing, but very slowly. Expensive used cars are still much easier to find than inexpensive ones.
In December, America’s car dealers had fewer than 39 days’ supply of used cars priced under $10,000. The segments ranging from $10,000 to $25,000 had days’ supply between 46 and 48. The category of $25,000 to $30,000 had the most inventory, with 52 days of supply. Price categories above $30,000 had days’ supply over 50 as well.
