Why did used car prices soar 40% in a year?

US used car auction giant Manheim announced that the used car market has reached record highs in October 2021. According to Mannheim, in October 2021, used car prices rose for the first time ever.

Mannheim creates and regularly publishes the Manheim Index, a used car price index that is not affected by vehicle type and vehicle usage by statistically analyzing more than 5 million used car transactions per year.

According to the Mannheim Index announced this time, the used car price index with January 1995 as 100 increased by 9.2% in one month from September 2021 to 223.7 in October, up 38.1% from the same month of the previous year. Mannheim reported that October 2021 was the first time in history that prices rose without seasonal adjustments in the Mannheim Index, which began in 1997.

There are reports that used car prices are overheating while used car sales are cooling down. According to Cox Automotive, an automobile market research firm, the total number of used car sales in October decreased by 10% compared to the same month of the previous year. In addition, the number of new car sales decreased by 23% compared to the same month of the previous year.

According to the report, the sharp rise in used car prices is the result of a drop in new car production due to a global shortage of semiconductors. Due to supply chain disruption due to the COVID-19 pandemic, the automotive industry has been hit hard by a shortage of semiconductors from 2020. As a result, large automakers are being forced to cut production or temporarily close their factories.

A supply chain expert said it was the worst-case scenario as a result of the combination of inflation and the loss of many people’s commutes in 13 years. He also expressed the view that the overall rise in prices and the increase in demand for automobiles due to the reopening of the economy are also contributing factors. Related information can be found here.