Rising used car prices could indicate soaring headline inflation


Illustration for the article titled Rising Used Car Prices Could Indicate Soaring Headline Inflation

Photo: TOSHIFUMI KITAMURA / AFP (fake images)

Used car prices soared 17 percent in the last 17 months, The Washington Post reports“More than any other commodity on the market.” And it could very well indicate that inflation could weaken the economy.

A large part of the auto sector problem stems from the fact that the auto industry suffered a massive turnaround as a result of the COVID-19 pandemic. The cars did not enter and nobody bought used cars. So used car companies started raising their prices as a way to boost what little sales they were making. And when people received their stimulus money and tax refund checks, the demand outstripped many lots.

With the Biden administration’s new stimulus bill coming into effect, economists have worried that the extra money “overstimulates” the economy. Now, I know a lot of people will call that nonsense; United States still suffering from high levels of unemployedt, which is why people generally theorize that the stimulus money will go to the essentials. But economists believe they can use the history of the used car market to predict trends.

Here’s more from the article:

Since the pandemic began, used cars and trucks have seen the fastest price growth of almost any category of consumer goods, according to data from the bureau Economic Analysis. The only categories competing with them are major home appliances and “potted flowers, seeds and plants,” whose prices have risen more than 10 percent between February 2020 and this January.

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Business owners like [Michael] Darrow says there is not much room to increase retail prices beyond what they are paying at auction. The new car supply chain has been constrained by factory closures and continued precautions to keep workers safe. And that, in turn, is pinching the used car market, which is heavily reliant on trades and auto parts. The global shortage of microchips is further ruining supply chains.

In total, it is more expensive for dealers to repair and obtain their models, plus the added cost of staying open during a pandemic.

Darrow doesn’t think the price increases he’s seeing can be sustained for long. Buyers knoww the value of a car, said Darrow. You sometimes wonder how long dealerships will be able to pass on higher prices for cars and trucks before their customers leave.

Basically, economists are concerned that used car inflation may indicate a rapid rise in inflation across the board, where the costs of everything it can jump up to 10 percent. The federal government aims to keep inflation low at no more than two percent per year and has consistently fallen short, but the 17 percent jump seen in the used car market is honestly quite heartbreaking.

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