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Chevy Silverado owner Franko Dokaj recently stopped by his dealership in hopes of buying new floor mats. Instead, he walked away with a deadly deal: The store offered to buy his one-year-old truck for $ 3,000 more than what it initially paid for last spring.
“I was like a ‘sacred cow’,” said Mr. Dokaj, who uses the truck for his car detailing business. “This is something I have never seen happen.”
Used car prices, which have skyrocketed in recent months, are now defying economic gravity.
Once considered the ultimate depreciable asset, some car owners are finding their vehicles are worth as much, if not more, than what they initially paid for them, according to dealers and analysts.
And some popular used models, such as the Kia Telluride and Toyota Tundra, regularly sell for thousands of dollars more than the list price of all-new versions, as auto retailers are historically low on vehicle inventory. used, based on industry data.
The recent surge in used vehicle prices is the latest in what has been a turbulent year for the US auto industry. Consumer demand for cars and trucks is near all-time highs, but automakers are struggling to keep up, hit hard by a global shortage of computer chips that is slashing factory production on the new car side.
As a result, shoppers unable to find what they want in showrooms flock to the used car fleet, where inventory is also limited by fewer people handing over rental vehicles and Car rental companies keep their fleet of vehicles longer because of finding replacements.
Prices for used cars and trucks jumped again, 10.5%, in June, according to the Labor Department, contributing to an overall rise in the consumer price index and further fueling fears of inflation. in the USA.
“We have a long way to go before prices go down,” said Tyson Jominy, automotive analyst at research firm JD Power.
Even though automakers are able to get their factories back to full operation by the end of the year, vehicle prices have risen so rapidly that it will take at least a year before they normalize, a- he declared.
The challenges of the offer are disrupting the conventional dynamic of car purchasing.
Historically, it was cheaper to buy a used vehicle than a new one, and overall it still is. But for some used models, mainly those with low mileage and bought within the past two years, the differential closes quickly.
For example, the average price a customer paid in June for a one-year-old vehicle was only about $ 80 less than the selling price of a new vehicle, according to JD Power. This gap is typically closer to $ 5,000 or more, according to company data.
“Looks like we’re in dreamland,” New England car dealer Abel Toll said.
He said his dealer group typically runs TV commercials that advertise the prices of the cars he is trying to sell. Now it runs ads telling customers how much their cars are worth.
The advertising has helped boost business on the new car side, because when customers realize how much they can get in a trade-in, they either switch to a more expensive vehicle or determine that now is the time to buy the car from. their dreams, Toll said. .
Utah-based car dealership Stephen Wade said his dealerships are so desperate to replenish used-car inventory that they now have tents outside where owners can get ratings behind the wheel. .
Mr Wade said that for some low-mileage models that are only one or two years old, it offers customers what they originally paid for.
“It’s just a frenzy,” Mr. Wade said. “And people are walking out of here clapping their heels.”
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‘It’s just a frenzy. And people come out of here clapping their heels.
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Even older models, including those 100,000 miles or more, are gaining in value.
The car-buying website Edmunds.com found the average selling price of a used car with between 100,000 and 110,000 miles in June was $ 16,489, the highest on record and on the rise compared to $ 12,626 a year ago.
Still, Mr. Wade and other dealers fear that prices are so high right now that buyers may later feel like they’ve paid too much, especially if values drop over the next several years.
“That’s what’s keeping me awake at night right now,” he said.
Meanwhile, car buyers like Mr. Dokaj are exploiting the market for all it’s worth.
The owner of the small business said he typically suffered a loss of at least 30% on each truck when he traded them in. But this time, he decided to trade his entire fleet, making a profit on each and using the money to upgrade to higher content models.
“I can’t imagine this will last too long, so I decided to go all-in,” Dokaj said.
Write to Nora Naughton at [email protected]
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