And the used car market will not help.
“A used one, two or three years old is selling for 96% of that vehicle’s original sticker price,” told TheStreet Pat Ryan, CEO and founder of CoPilot, which tracks prices at car dealerships across the country. “It’s 96% of its cost when it was new if you just focus on 2019, which are the cars to rent.”
He added that there is a real shortage of cheaper cars.
“To put that in perspective, typically in a typical year, 21-22% of new cars are priced under $25,000. Today, only 3.5% of new cars are priced under $25,000.”
Ryan repeated: “The average American, the average worker, can’t buy a new car because the prices are too high; there is a shortage of cheap cars available.”
Low stock of cheap cars
While searching for Carvana (CVNA) – Get a Class A Carvana company report (an online marketplace for used cars), TheStreet noted that the number of used cars available under $25,000 was tiny.
Inventory decreases further when looking for vehicles less than 10 years old, which typically represent the majority of the market under $25,000.
If someone needs to buy a car [under] Ryan said $25,000 isn’t a lot to sell unless you want to buy a much older car. “What happens are cars that are more than seven years old, so like 2014 and earlier, those prices have been up 10 out of the last 12 weeks.”
In the market for newer cars — used cars that are one to three years old — there is a quandary: Dealers aren’t cutting prices, and consumers are slow to buy, he said.
Edmunds’ Jessica Caldwell warned that “automakers are still grappling with ongoing supply and production disruptions caused by chip shortages and the Covid-19 virus; moreover, they are likely to face new challenges as a result of the invasion of Ukraine.” Vision Executive Director.
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This combination of headwinds could mean inventory issues will continue through the end of the year, she said.
The situation is not about to improve.
Car manufacturers prefer expensive cars
GM (GM) – Get the General Motors reportstronghold (F) – Get a Ford Motor Company report and Stellantis (STLA) – Get a Stellantis NV . report Production has been halted at some locations due to a shortage of chips. In the face of this crisis, automakers are prioritizing more expensive vehicles that have profitable operating margins such as vans.
In the last week of March, Ford and General Motors said they would halt production starting this week at a plant in Michigan due to a shortage of parts, the two companies said separately.
GM will cancel production at its Lansing Grand River complex, where it makes the Cadillac CT4, Chevy Camaro and Cadillac CT5. Ford will halt production at the Flat Rock Assembly Plant, the home of the Mustang.
All vehicles, regardless of fuel type, are selling at an accelerated pace compared to last year, which means demand is strong. Therefore, merchants and sellers do not see the benefit of lowering their prices.
In March 2022, average days to turn (DTT) for electric vehicles fell to 21 days, compared to 63 days in March 2021, according to Edmunds. 39% of all electric vehicles were sold within the first week of arrival on a dealer deal in March 2022 compared to 24% a year ago.
Hybrids are down 15 days, compared to 48 days in March 2021. 54% of all hybrids were sold within the first week of their arrival on a dealer deal in March 2022 compared to 27% a year ago.
Gas-powered vehicles decreased to 20 days, compared to 62 days in March 2021. 43% of all gas-powered vehicles were sold within the first week of arriving at a dealer in March 2022 compared to 20% a year earlier.
Diesel vehicles are down 23 days, compared to 36 days in March 2021. 39% of total diesel vehicles sold during the first week of their arrival on a dealer deal in March 2022 compared to 26% a year ago.
“Dealers are saying well, ‘I won’t lower the prices of my new cars nearby because I don’t have any new cars to sell anyway.’ That’s the showdown in this market. Old cars keep going up in price they continue their upward trend because there aren’t enough cars available to people ‘ Ryan said.