Along with the price of toilet paper and other goods, the pandemic has also caused a spike in auto prices throughout the U.S. As some Americans browse the marketplace for a new vehicle they might be in for a sore surprise. The price of a new vehicle jumped 6% between January to December of 2020 to a record $40,578, according to data from Edmunds.com.
Prospects are even less inviting if you’re looking for a used vehicle. The price of an average used car jumped 14% compared to pre-pandemic prices. That is nearly 10 times the rate of inflation bringing the average cost of a used car to $23,000.
The auto industry is certainly important to the American economy, but with the virus sidelining certain key industries, production has certainly taken a toll. The reason costs have risen so much is simple supply and demand. With production having to be halted to stem the pandemic there are now too few vehicles for too many buyers. In short, vehicles are now scarce.
But even before the pandemic, automakers had been steadily raising prices out of the reaches of working-class folks for years. Pre-pandemic it was not uncommon for buyers to sign on for 60-month loans for a new vehicle. Meanwhile, Ford, GM, and Chrysler had phased out their line of sedans, while Honda and Toyota have discontinued U.S. sales of subcompacts in favor of more expensive SUVs and crossovers.
“The industry has been abandoning that $30,000-and-below price point,” Charlie Chesbrough, senior economist for Cox Automotive, said. “Essentially, they’ve been forgoing that territory to the used car market.”
What this means for the U.S. auto industry is unclear. Will current automakers make a return to more budget-friendly vehicles or will a new competitor come to sweep that market?
Experts hope to see car prices ease back down as car plants start cranking up production and the virus wanes, but with millions of fewer vehicles on the road than usual, it will certainly be a tall order.
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