RICHMOND, VA – Between high prices for used vehicle, coupled with and even higher interest rates on auto loans, many prospective car buyers are finding themselves priced out of the market entirely as going pre-owned – formerly a way to save a buck or two – has become entirely unaffordable for many people these days.
This new reality has hit many pre-owned car dealers particularly hard recently; for example, CarMax – one of the largest used vehicle dealers in the United States – announced in a report released on Thursday that their earnings have taken a nosedive as of late, decreasing a whopping 54 percent year-over-year; in their most recent quarter alone, the company saw its number of sales drop 6.4 percent from the corresponding quarter from 2021.
To explain the plunge in their business, CarMax noted in their report a number of contributing factors, with nearly all of them stemming from the current economic woes the country is facing.
“The issues are vehicle affordability challenges that stem from widespread inflationary pressures, as well as climbing interest rates and low consumer confidence,” the report said.
The used car market has experienced massive increases in prices over the past two years, driven mainly by COVID-19 related supply chain issues that have resulted in rampant semiconductor shortages, and in turn, a lack of new cars that depend upon them being built. As a result, buyers have been forced by scarcity to turn to pre-owned vehicles, and as we all know, demand sets the price.
As of August, used car prices are up 48 percent from 2019, and new car prices up 30 percent.
While the CarMax’s overall earnings were not entirely dismal due to the higher prices used cars command these days generating additional revenue, the results were still nonetheless below levels initially forecast, worrying investors in the company. CarMax shared plummeted over 24 percent on Thursday, as did the stocks of many other publicly-traded pre-owned sellers such as Carvana (23 percent), AutoNation (10 percent).
This malady isn’t limited to pre-owned sellers; many big automobile manufacturers also saw their stocks take a hit this week, including General Motors, Ford, Stellantis, and Tesla.
With the 40-year high inflation that is constantly plaguing Americans these days, increasing the cost of everyday necessities such as food and fuel, cars – both new and used alike – have simply become unaffordable for many.
Christopher Boyle is an investigative journalist, videographer, reporter and writer for SEARCHEN NETWORKS® and The Published Reporter® as well as other independent news and media organizations in the United States. Christopher works on a wide variety of topics and fields, has been featured in print and online in a variety of publications, from local to national, and helps keep a keen-eye on what’s happening in the automotive world for Auto Buyers Market.