The used car hangover could last for years

The relatively low number of new vehicles produced in the past 18 months will likely keep prices high going forward, experts said. Automotive News. Seasonality, or when the market follows traditional value trends throughout a given year, could still be more than two years away. And even then, low vehicle production numbers for 2020, 2021 and possibly beyond will take their toll.

“This late second-hand car shortage is going to last for years – years – and there’s nothing you can do about it,” Pollak said. “You can’t make next-generation used cars overnight. They must be built, [they’ve] must be sold, [they’ve] must be used.

When the production of new vehicles returns to levels which become the new normal levels, automakers are likely to supply dealerships first to fuel retail demand. Then they will turn to business customers. Once those pipelines are full, it will take another six to 18 months for these cars to become used vehicles, Pollak noted.

Cox Automotive estimates the industry’s overall supply of unsold new vehicles in August was 1.4 million lower than the same period in 2020 and more than 2.5 million lower than at the same point in 2019 .

David Paris, senior director of market analysis at JD Power, said next year the typical level of 12-18 month old vehicles “just won’t be there.”

This vintage represents a large portion of what dealers use for used cars and trucks ready for dealership storefronts that they can sell as certified pre-owned vehicles.

Already this year, the supply of one-year vehicles is down 40% year-on-year, according to JD Power.

And in two to three years, there will be far fewer non-rental vehicles returning to dealerships, Paris said.

“Second-hand sourcing is going to be a huge issue here for the next three years as we sort of work on it,” Paris said.

JD Power predicts that the supply of used vehicles will decline in 2022 and 2023, when it will bottom out, before normalizing or at least recovering in 2024.

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