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Used car prices reach all-time high, continue to climb

A mixture of a pandemic and a microchip shortage has pushed used car prices through the roof.

HOUSTON — When Javier Padilla moved from New York to Humble, he had a list of things to do before starting a new job. One of the items on the list would turn out to be a job on its own. Padilla needed to find a used car.

“It needs to be reliable every day,” he said.  “It needs to be a gas-saver and if it can look good that’s a bonus.”

But when he started his search, there was limited inventory and prices are higher than he expected.

Rachel Garza is having the same problem. She’s searched for an affordable SUV for weeks.

“Frustrating,” she said. “They want so much down and the monthly payments are really high.”

Tony Hadegh knows all about the used car shortage. He’s having a hard time finding cars to sell on his lot.

“I usually keep about 80 units,” he said pointing at a bare lot. “Look at this. I cannot get 'em.”

Hadegh said that trade-in prices are through the roof and that's trickling down to the customer.

“If the vehicle that they were buying last year around this time was for $20,000, they’re gonna be paying $26, $27,000. Madness. I’ve never seen anything like this,” Hadegh said.

There are a few reasons for the used car shortage. Fewer new car sales in the past year equal fewer trade-ins. Rental car companies are buying used to replace fleets after selling off cars when travel was low. On top of all that, there’s a global microchip shortage. The chips used in computers and wireless devices also add technology to new cars. That shortage is slowing production.

The shortage has pushed the average used car price to an all-time high of $25,500 according to marketing research firm J.D. Power. Jonathan Banks is the firm’s vice president and general manager of vehicle valuations.

“Anytime you’re in an economic situation where the future is uncertain, people gravitate towards a lower-priced option. That’s used cars,” he said.

Banks said vehicle prices are going up 2% a week, making it a tough time to buy but a great time to sell.

“I’m telling my friends if you have a car sitting in your driveway that you don’t use very much and you can live without it like maybe you have multiple vehicles, it’s time to sell,” he said.

If you’re wondering how much your car is worth. Check these sites:

If you’re in the market to buy, Emilie Voss with Carfax says to not let your guard down.

“I think that right now there’s this competitive feeling,” Voss said. “You find this perfect vehicle inventory’s short you just want to go buy it. You really need to take that breath and make sure you do the homework as well.”

Car sales are expected to level off when the microchip shortage ends. Industry analysts predict that the shortage could end later this year, or in 2022.

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