YOUNGSTOWN, Ohio – Drive past car dealerships in the area and you’re likely to find a less-than-familiar sight: mostly empty car lots. While sales of new and used cars are far outpacing last year’s figures, there’s plenty of pent-up demand but not the supply to meet it.
In April alone, the Bureau of Labor Statistics inflation report showed used-car prices up 10%, marking the biggest single-month climb since the federal government began keeping tabs on the Consumer Price Index in 1953.
The same month, industry analysis firm J.D. Power reported the average price of a used vehicle was at $25,463, an all-time high. Nationwide, sales were at 3.4 million, a 58% jump from April 2020.
According to the Greater Cleveland Automobile Dealers Association’s monthly sales report, there were 2,602 used vehicles sold in Mahoning, Trumbull and Columbiana counties in April, a 129% increase from last year. Year to date, sales of used vehicles in the area are up 19.7% compared to the same period a year ago.
The climb in prices is due to a confluence of factors. Somewhat counterintuitively, new cars are often the driving force behind the used-car market, says Greg Greenwood, owner of Greenwood Chevrolet stores in Austintown and Hubbard. With many automakers slowing or stopping production due to a shortage of microchips – as well as other necessary materials such as plastics and foam for seats – new-car inventory is dropping.
At the Austintown dealership, Greenwood says inventory this time of year is usually between 500 and 600. On May 1, it was 110. Because of that shortage, there are fewer used cars coming to dealerships as trade-ins that can be resold.
“It’s not the easiest thing in the world to acquire a used car. It’s a lot easier to take them on trade when you have 500 new cars to sell,” Greenwood says.
There’s also the lingering economic effects of the pandemic, says Louis Vitantonio, president of the Greater Cleveland Automobile Dealers Association.
As travel slowed, rental car companies downsized their fleets. Now that the country is opening back up, they need to get back to pre-pandemic levels, he explains.
“To survive or improve cash flow during the pandemic, the companies sold a good amount of inventory and now they’re back in the market for lightly used vehicles … because they can’t get brand new ones,” Vitantonio says. “On the rental side, low-mileage and previous model year vehicles are wanted across the spectrum, from Silverados to Maximas.”
Also limiting availability is a steep drop in auto repossessions, which were down by about half in 2020, according to a report by the Federal Reserve Bank of New York, primarily due to aid provided during the pandemic.
But the rising costs of new cars – wholesale prices are up about 10%, Vitantonio says, and that means higher retail prices for consumers – aren’t scaring dealerships.
“It’s not the be-all and end-all. We’ll still be here selling cars. It’s just a matter of the climate changing, which happens all the time,” says Steve Bott, sales manager at Mark Thomas Ford in Cortland. “Ten years ago, people wanted fuel-efficient cars when gas prices were $4 or $5. Then they came down and people went to trucks and SUVs.”
The surge is also helping other parts of the dealerships, Greenwood adds, as activity in the Chevrolet dealership’s service department has been “quite robust,” with drivers looking to extend the life of their vehicle as long as possible.
“People are taking even better care of their cars because they know they may not be able to replace it easily,” he says. “And, when they’re ready to trade, they want it to be worth its maximum value.”
While prices have been increasing, that can also be good news for consumers who are looking to get into a different ride. Book prices from organizations such as Kelley Blue Book or the National Automobile Dealers Association have also gone up, allowing customers trading in their vehicles to get more money.
“When you have something that you owe some money on and the Blue Book price goes up $2,000 or $3,000, that may help you when you’re looking at getting into something new,” Bott says. “The rising [used-car] prices might be something that makes your new payment work.”
Coupled with low interest rates, buyers may be able to find something that fits in their budget, even if the vehicle itself is more expensive than a month or two ago.
The rising prices won’t last forever, local dealers say, with the caveat that they aren’t exactly sure when they’ll start falling back to Earth.
Bott expects it to start happening in June or July as supply chain issues start to be resolved.
Whenever it may be, Vitantonio says, the used-car market will continue to react to the new-car side of the industry.
“A good 60- to 90-day supply is normal. Right now, we’re at single-digit, maybe a 12-day supply,” the auto dealer association president says. “Until production gets to a respectable level, we’ll still have high used-vehicle prices because that’s the alternative. If people don’t have the new selection, they turn to lightly used.”
Pictured: Steve Bott of Mark Thomas Ford in Cortland stands in the pre-owned vehicle section of his dealership.