The used car market has been particularly problematic for buyers since the start of the coronavirus (COVID-19) pandemic. Used vehicle prices have consistently increased since early 2020, with some options like the 2021 Chevy Corvette currently exceeding their MSRP when they were new. However, one indicator that the situation may be imminent is CarMax’s recent $23,000 price tag for a 12-year-old Ford Ranger.
Reasons for current prices on CarMax and on the used car market
According to the Los Angeles Times, the supply of used cars is very low even in early 2021, and the situation is getting worse as time goes on. Of course, the price of a car will rise if supply is less than demand. As for why the supply is short, there are several reasons.
One is that automakers can’t manufacture used cars, and you only have currently publicly owned models to work with. Coupled with the fact that the car rental industry used to be one of the biggest sources of used cars. However, that changed during the early stages of the pandemic when travel was restricted. As a result, instead of car rental companies selling their 12-month-old vehicles and buying new ones, they initially sell their cars without buying a replacement.
A few months later, this same car rental company returned to the used market to repurchase several models for their business. This of course reduces the number of used cars on offer. Also, because they haven’t bought a new car, that means 12-18 months later, they won’t be adding to the supply of used vehicles on the market.
Furthermore, banks are more tolerant of their recall practices during the coronavirus pandemic, allowing consumers to partially defer their vehicle payments. This is another source of disconnected used cars.
Regarding demand, people are worried about buying a car in the early stages of the pandemic. However, with the extra money they’re saving thanks to lockdowns, fewer spending opportunities, and expanded government benefits, they’re more willing to spend on vehicles.
Unfortunately, this coincides with fewer new cars on the market, which means more buyers will have to turn their attention to used cars. The result is used car prices soaring, and one of CarMax’s recent listings shows just how bad the situation is.
12 year old Ford Ranger CarMax for $23,000
CarMax asked for about $23,000 for a 2010 Ford Ranger which featured a 2.3L 4 cylinder engine. It’s also two-wheel drive and, to its credit, appears to be well-maintained. You can see that in the pictures of the dashboard, upholstery, and bed, not to mention the air conditioner also seems to work well.
While it’s in almost pristine condition, there’s no hiding the truck’s age, and it’s easy to see the price tag looks pretty out of place next to the Ranger. For context, the 2022 Ford Ranger has a starting price of $25,285, just $2,285 more than the asking price for the 2010 CarMax model.
The 2022 version, of course, will have a newer engine, better security ratings, better performance, and a host of other modern features. Plus, you can get a $19,995 2022 Ford Maverick as an alternative, driving home how absurd the CarMax listing is.
Admittedly, there is a shortage of new vehicles, making buying a new pickup truck even more complicated. That said, selling a 12-year-old Ford Ranger pickup truck for $23,000 is still ridiculous.
New cars and how changes in the auto industry affect prices
Along with CarMax, the used car market underwent the most significant changes, but the new car market was not much better off, with prices also rising. Kelley Blue Book calculates the average cost of a new vehicle in December 2021 to be $47,077. By contrast, according to CNBC, the median price of a car in the US in 2019 was $36,718.
The new car market is also experiencing supply shortages due to chip shortages and supply chain problems, which are directly linked to the pandemic. Nonetheless, Car and Driver notes that car manufacturers and dealers are also taking advantage of the situation.
Automakers seem to prioritize model building and higher profitability over more affordable cars with limited materials. Also, there is no need to include purchase incentives such as lower prices because demand is higher than supply. For the same reason, dealers can charge a car much higher than the MSRP and still sell the car.
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