Owning a car now is becoming an arduous affair and one task that requires enormous financial planning. The reason is the high cost of new vehicles currently in the market. If you have not noticed so far, the price of newly built cars has risen and skyrocketed way more than ever before. That poses a significant challenge to buyers who plan to secure their first rides. The ridiculous price tags are pushing people to go after other resorts. One way that most people have chosen to go is the used car way.
Sadly, there is no stone left untouched there as well. Things are also different, with used car prices reportedly higher than usual. The trend has been rising for the last couple of years, and now it seems to have reached its peak. There are many speculations about whether the same trend will still dive into the coming year now that 2022 is also ending. This article will dig into the issues and elaborate on whether we need to brace for more tough prices or smile for a relative change in 2023.
As you plan on securing your used car, remember that the vehicle will need protection. Especially once the factory warranty has expired, you won’t be able to manage all sudden expensive repairs alone. That is why we are introducing extended warranties to you. There are lots of extended warranty providers in the market. You must secure a plan and get your used car shielded from any unprecedented faults and breakdowns.
Why have used car prices risen?
Before understanding whether the prices of used cars have continuously been rising, we first have to know what factors are behind the high prices. These factors are as follows;
#1. Computer chip shortage
This is arguably one of the core reasons behind the high cost of used cars. This factor might not affect used cars directly but affects the general production of newly built cars. The companies producing computer microchips have reported low production rates over a long time. The reason behind that is the scarcity of raw materials for manufacturing the necessary chips on cars’ computers.
The low production rate of these chips has affected automobile companies as well. The car manufacturing factories have been affected so severely that their production rates have also been sliced. Since computer microchips are so vital in all modern vehicles, there is no way a car is made without one. With the reduced production rate from the chip manufacturers, the number of vehicles produced annually has gone down.
The automobile industry has faced a shortage of computer microchips and other components such as copper, aluminum, and cobalt. The shortage of new cars in the market automatically puts more demand on used vehicles. When the demand gets high, dealerships have no option but strategically lift the price tags of available used cars for sale.
#2. Less inventory.
This fact is undebatable. Currently, the number of newly made cars is so low hence unable to meet the global demand from customers. Those seeking to purchase brand new cars now have to dig deeper to secure, opt for a used car or wait and watch, hoping things get back to normal. With the shortage of new vehicles, the available used counterparts are almost unaffordable.
Inflation is undoubtedly among the most significant causes behind the sudden rise in the prices of used cars. Currently, the global economy has surged to over 7% inflation rate. This has left many companies and the loss of other economic sectors tumbling. Most of the production has risen, costing commodities more than double. In that case, used cars have not been untouched by the current inflation.
#4. Increased bank rates.
Remember, not everyone purchasing a car always comes with cash all at once. A considerable percentage of car owners always get their vehicles through bank loans. Unfortunately, the banks have more than doubled their interest rates over the past five years. Most banks now charge over 5.5% interest rates. Inflation is one key factor behind those crazy interest rates.
Purchasing a used car in 2022 is getting tough, all due to the enormous price changes. The increase in the price of used vehicles has been a trend that has been happening for some time now. The reasons mentioned above are among the reason for the price increase. Going with the same trend, the price of used cars is high going into 2023 head first.
Therefore, if you plan to purchase a used car in 2023, brace for more in terms of the price increase. The reason for the price change mentioned above seems like it won’t change any time soon. Besides that, you are reminded to secure your car with an extended warranty. This will guarantee maximum protection from unforeseen breakdowns that could turn out costly.