The Case Of The Soaring Car Prices

 The Case Of The Soaring Car Prices - Podcast

Usually, cars depreciate over time. However, since the pandemic hit, car prices have been skyrocketing. A guy named Aaron Springer was able to sell his 2014 Volkswagen Jetta SportWagen during the pandemic that he bought used in 2018 for $1500 more than what he paid for. Why are cars getting so expensive?

There are four main reasons why supply of cars is decreasing. First, production of vehicles stopped as a safety measure when the pandemic hit. Second, some states put a moratorium on car repossessions since it is a really devastating time to lose a vehicle, meaning less used cars are entering the market. Third, rental car companies weren't buying new cars to replace their older used cars which usually injects around 2 million used cars into the market every year. They've held onto their vehicles because no one was driving what they already had. Fourth, lease extensions were granted because no one wanted to deal with lease renewals during a shutdown, so those cars didn't enter the market when they were supposed to.

There are also four main reasons why demand increased. First, the stimulus check stimulated demand because people wanted to put the money towards a car. Second, people are afraid of using public transportation due to fear of getting sick, so cars are the safest transportation option. Third, people who had a car are now looking for a different car due to lifestyle changes from COVID. For example, someone may now have a longer commute, and they want a more eco-friendly, small car. Fourth, people who are working during the pandemic have extra money to spend because they aren't going out and spending their money. Plus, interest rates are low.

These eight culprits are the reasons why car prices have been soaring during this pandemic when people predicted the opposite. There's more competition struggling to get cars from a smaller pool of options.