(NEXSTAR) – Thinking about buying a car? Brace yourself for the price tag.
The Manheim U.S. Used Vehicle Value Index, which tracks millions of used car transactions annually, shot up to a new record high of 191.4 on Tuesday – a 52.2% increase from April of 2020.
According to the index, the “spring leap” in used car prices may not slow down any time soon. Accelerating prices and sales efficiency suggest that this trend will continue for at least the near future, a Manheim report states.
If you’re thinking of buying a new car instead, don’t count on paying below the sticker price.
JD Power says the average price for a new car in the first quarter of 2021 was $37,200 – an 8.4% increase from the first quarter of last year, CNN reports.
Is there any hope for hagglers trying to work a salesperson for a deal?
With inventory low, the research firm’s stats show that roughly half of car buyers paid within 5% of the sticker price with some exceeding it.
What’s causing the high prices?
Experts say there are several reasons for the spiking vehicle costs, but the COVID-19 pandemic continues to be a major factor.
Under normal times, the nation’s used car supply is continually replenished by people upgrading to a new car, but, after the coronavirus forced people to work from home and sparked nationwide economic uncertainty, new car sales dried up, JD Power says. The stunted used car supply sent prices skyward as it was outpaced by demand.
The pandemic also upended the global supply chain that car manufacturers rely on, which reduced the supply of new cars, according to JD Power. Prices subsequently climbed for the cars that did make it off the assembly line and into showrooms.
Chip shortage disrupts manufacturing
Automakers are also suffering under a global chip shortage that has crippled production. On Thursday, Jaguar Land Rover said it would halt production at two of the company’s factories in the United Kingdom.
General Motors and Ford said earlier this month they were being forced to cut production at their North American factories because of tightening chip supplies. Other marques like Fiat Chrysler, now Stellantis, Volkswagen, Nissan and Honda have also been hit hard by the semiconductor shortage.
Tightening chip shortages have been rippling through various markets since last summer. As the coronavirus pandemic erupted in early 2020, chip factories started shutting down, particularly in Asia, where much of global semiconductor production is based. By the time they started to reopen, there was big a backlog of orders to fill.
The semiconductor shortfall deepened after a fire last month at a plant owned by Japan’s Renesas, which makes chips for Toyota, Nissan and Honda.
Stimulus checks and a return to work
Amid the manufacturing crisis, sales are booming.
Many Americans now have more to spend as the IRS and Treasury continue to disburse millions of $1,400 stimulus checks as part of the Biden administration’s $1.9 trillion American Rescue Plan.
With millions of Americans being vaccinated daily, a return to work could be on the horizon for some, who are now reconsidering their transportation options.
“It’s a perfect storm,” Charlie Chesbrough, a senior economist for Cox Automotive, told CNN. “If you’re not willing to pay near sticker price, there’s someone behind you who is. These issues will be with us through at least the rest of this year.”
The Associated Press contributed to this report.