While many may question the value of buying a used car, the auto industry is experiencing a shortage of new models. Dealerships often have few models to choose from, forcing them to accept any used cars that they can find. Often, this means that used cars are outselling new ones in price. However, in this situation, the used car market is thriving. According to a recent report from Kelley Blue Book, used cars are outselling new cars by 42%.
The market for new cars has continued to decline, with registrations in May reaching their lowest level since 1992. The Covid-19 pandemic, however, is having a detrimental effect on car sales. In April, car registrations fell 15.8% year-on-year, while the CAGR for used cars was 3.4 percent. The slumping sales of new cars is partly attributable to supply chain issues and policy reforms. In addition, the ongoing trade war between China and the US has affected global supply chains and led to a decrease in new car sales.
Despite this, it remains unclear what the long-term effect of this trend will be. Fiorani predicts a decline in used car prices of 20% to 30% before October 2022-2023, which could be good news for used car shoppers. However, the expected plunge could spell trouble for those who plan to finance their used car purchase. So, how can we get a better understanding of the future of the auto industry?