Demand, price for used cars surge amid low new vehicle supply

Used car prices rose more than 35 percent in Las Vegas in February compared with the previous year as the car market as a whole feels a pinch from global supply chain problems.

Market analysts say the high demand for new cars combined with a shortened supply of computer chips used in new cars is ultimately trickling down to even the oldest of used cars for sale, driving prices up because someone will be willing to pay.

Car research and search engine site iSeeCars found that used cars were about 35.6 percent more expensive in February compared with the same month in 2021 — on par with the national average of 35 percent, according to the site’s analysis. It’s an average price increase of more than $8,000.

“When you can’t buy a new car, what do you do? You keep your current car, which causes used car constriction,” iSeeCars executive analyst Karl Brauer said. “If you’re holding onto your used car, now the companies and dealerships that have used cars coming in on trade for new cars stop getting their used car supply.”

The problem is not unique to Southern Nevada. Edmunds, a car shopping guide site, found the new car transaction price is up 12.7 percent year-over-year nationally. The rising new car price and limited supply pushes up the average transaction price for used cars, sometimes to prices that don’t reflect vehicle depreciation and “defy logic,” Ivan Drury, senior manager of insights with Edmunds, said.

In February 2021, the average transaction price for a 7-year-old used vehicle was $15,638, according to Edmunds’ analysis. Last month, it was $22,584 — a 44.4 percent increase.

“People are all fighting over the same goods,” Drury said. “When you have multiple people raising their hand saying, ‘Hey, I want to buy it.’ Whether it’s a new car or used car, I can’t blame the seller. If they charge more for it, it’s only because there’s somebody else saying, ‘I will pay more for it.’”

‘Our family budget is already getting stretched’

In Las Vegas, sellers have noticed the problem for a few months. Used car dealership Baja Auto Sales West had a fleet of 2019 Nissan Sentras selling for about $16,000, “like hotcakes,” sales manager Miles Gonzalez said. When they returned to auction several months later, they couldn’t buy the car for less than $20,000.

Gonzalez said the dealership on Decatur and Charleston boulevards specializes in offering low-money down loans or working with customers with bad credit. It can be harder for a customer to qualify for loans of certain monthly payments.

“When somebody comes in with low money down or not-so-great credit, a $14,000 or $15,000 car is basically what we’re looking for,” Gonzalez said. “Now the car is 10 years old and the bank doesn’t look at it the same way.”

For customers, it makes shopping and purchasing more difficult. Summerlin resident Adam Johnston said he has been looking for a new or used vehicle on-and-off since last November, but keeps getting discouraged by the lack of available inventory that fits his budget.

“I was really frustrated,” he said. “It’s been a really gut-wrenching decision because I don’t want to sign myself up for a really high bill long-term and obviously I want to be mobile. I’m kind of nervous for if prices are actually going to go down in the future.”

Johnston said he still hopes to buy a car in the next three months to help him get to job sites for his new business in audio/visual effects for concerts and video editing. In the meantime, he occassionally shares his wife’s car, rides his bike or uses Lyft to get around.

“It’s this thing that’s been on my to-do list for multiple months and now thinking about going back into dealerships, it’s exhausting,” Johnston said. “Not optimal by any means, especially when gas prices are so high. Our family budget is already getting stretched, just taking care of my wife’s car as well.”

No letting off the gas

Analysts suspect the problem will stick around, possibly into 2023. Sellers will have to address the growing backlog in demand while vehicle production ramps up.

“We’re not looking at those new car inventories returning anything like normal until the end of this year,” Drury said. “Even then, we’re not talking about those blowout sales where the dealers have the hot dogs and the bounce house for the kids. It’s not going to happen. There’s still so many people today who are ordering cars, that are buying them sight unseen. There’s so much demand that we can’t backfill any time soon.”

Brauer recommends to consumers on the market with a specific budget to consider widening their search zone and reducing brand loyalty. A trip out of the area may cost $1,000, for instance, but yield a car that’s $3,000 cheaper than local sales.

“The average person would probably look in their local city like they always have in the past for their next used car,” Brauer said. “One of the best ways to increase your chances of finding the car you want and or at a price you want is to expand your geographical consideration. That’s what I’m telling people, is flexibility not only in which car you want, but where you’re going to look.”

McKenna Ross is a corps member with Report for America, a national service program that places journalists into local newsrooms. Contact her at mross@reviewjournal.com. Follow @mckenna_ross_ on Twitter.