It may be time to retire the used car salesman jokes, at least for a while.
Sales of used cars are strong across the United States and Europe, the Financial Times (FT) reported. Factors driving the increase include a chip shortage that has limited supplies of new cars and reluctance among virus-weary commuters to crowd onto public transportation.
As a result, according to FT, the usual economics of buying cars — vehicles shed value from the moment new owners leave dealers’ lots — have been flipped upside down.
Cap Hpi has tracked prices of used cars on a “live” basis since 2012, FT reported. Before 2021, according to the data firm, the biggest monthly increase in average prices was 1 percent in 2018; this May, they rose 6.7 percent.
“Normally cars depreciate, they don’t go up in value,” Cap Hpi Head of Valuations Derren Martin told FT. “But right now, cars are an investment.”
AutoScout24, a prominent seller of used cars in Germany, told FT: “In the past, due to the season, the price curve usually dropped somewhat at the beginning of the spring and summer months.” Instead, prices went up in April.
Prices in Germany are rising partly due to scarcity, the company told FT, “but the increasing popularity of luxury cars and classic cars is also causing average prices to rise relatively sharply.”
In the United Kingdom, according to FT, a 1-year-old Audi A3 is worth 7 percent more than a comparable car would have been a year ago compared with the prior year.
“I’ve been doing this for 28 years, and I’ve only ever seen this happen twice,” Daksh Gupta, head of Marshall Motors, a car seller in the U.K., told FT.
The previous time was in 2009 when the industry couldn’t ramp up fast enough to meet post-global financial crisis demand, FT reported.
The pattern in the U.S. has been similar. For example, PYMNTS reported in April that the average price of rental cars being sold was up 25 percent year over year.