Used automotive costs to remain excessive till automakers repair manufacturing points

If you’re waiting for used car prices to fall, check out the latest advisories on how a sign that prices have already started fallingsays one of the largest used car salesmen in the United States not to be too excited.

The rise in used car prices is unlikely to slow until manufacturers can start producing cars at pre-pandemic prices, according to the CEO of Carvana.

“[Used car sales] The volume is pretty much in line with 2019, it hasn’t changed that much – the main difference is that so much fewer new cars are being made and that is driving prices up. “Ernie Garcia, CEO of Carvana, said on CNBCs”Squawk boxβ€œon Friday.” I think up the supply chains on [original equipment manufacturers] Find out that it is likely to have a lasting effect. “

Automakers have struggled to maintain production in the face of the shortage of semiconductor chips.

fordthat had to cut his North American vehicle production in July and August due to shortages, the earnings report for the second quarter said that the supply was improved but that it lost production of about 700,000 vehicles during the quarter.

General Motors said the chip shortage will reduce its revenue by $ 1.5 billion to $ 2 billion and has been idle some of its North American assembly plants due to scarcity.

Nissan said in May it probably half a million fewer vehicles this year while BMW recently warned that the shortage will creep in by 2021.

The chip shortage will cost automakers an estimated $ 110 billion in lost sales this year, according to a May report by consultancy AlixPartners.

Used car companies see sales increase

Customers inspect a Fiat Chrysler Automobiles NC Dodge Grand Caravan minivan at a Carvana Co. location in Westminster, California, United States on Thursday, May 28, 2020.

Patrick T. Fallon | Bloomberg | Getty Images

The drop in production was a boon for used car dealers like Carvana. The company reported its first profitable quarter on Friday, posting net income of 45 million a year ago in the second quarter of 2021, and for the first time in its eight-year history, it sold over 100,000 cars in a quarter. Carvana stock is up 44% this year through Friday.

These gains have been accompanied by a large increase in used car prices. The average transaction price for a used car was $ 25,410 in the second quarter of 2021, down from $ 22,977 in the first quarter and 21% year over year. according to dates from the online automotive resource Edmunds. That number marks the highest average price over a quarter for a used car that Edmunds has ever tracked.

Debate over when used car prices level off

These high prices have helped boost the used car industry.

EchoPark Automotive, a division of Sonic Automotive that sells used vehicles set a record quarterly earnings of $ 595.6 million, up 88.9% year over year. Retail sales grew 68.9% year over year.

CarMax, the largest used car dealer in the U.S., recorded in the first fiscal quarter of 2022, which ended on 31. The company said it sold 452,188 units through its retail and wholesale channels during the quarter, up 128% year over year.

Regarding when prices might level off, Garcia said, “In the next six months, or even 12 months, I think it’s hard to say.”

“What we are finding is that OEMs supply chains are perhaps a little more fragile than we all would like, and that thousands of parts are being made around the world and waves of covid popping up in different parts of the world I think that makes it really difficult predict when that will return to normal, “he said.

By comparison, Jeff Dyke, President of Sonic Automotive, recently said on CNBC’s “Worldwide exchange“that he expects the chip shortage to ease in the coming months, what start lowering the price of used cars.

“The new car stocks will get better and better in the next few months towards the end of the year,” said Dyke. “This will reduce the number of inventory problems on the used side.”