The U.S. car market is still grappling with the repercussions of the Covid-19 pandemic, which severely disrupted the supply of new vehicles. According to Jeremy Robb, chief economist for Cox Automotive, approximately 8 million vehicles that would have been produced for U.S. buyers were never made due to production shutdowns and supply chain issues.
Automakers have shifted their focus towards producing higher-end, more profitable vehicles, which has further constrained the supply of both new and used cars. As a result, prices for used vehicles, even those over a decade old, have surged. Robb notes that this trend may represent a 'new normal,' with supply unlikely to improve significantly in the next three to four years.
Sales projections indicate that about 15.8 million vehicles are expected to be sold in 2026, a decline from the pre-pandemic record of 17.55 million in 2016. The reduction in leasing, which fell from 30% of the new vehicle market pre-pandemic to just 18% in 2022, has also contributed to the tight supply of used cars.
With high gas prices and inflation affecting consumers, many are now seeking older, more affordable vehicles, indicating a shift in buying behavior. JD Power's Tyson Jominy highlights that the average household income for new vehicle buyers is significantly higher than the national average, suggesting that fewer consumers can afford new cars, further driving demand for used vehicles