The cost of used vehicles has increased in recent months as a result of increased demand and inventory restrictions on new models, caused by reduced supply of chips and logistical disruptions.
But the lack of new cars available made customers turn to used ones, causing units to soon start to run out.
“As there were no new units available, people also began to delay the sale of their used units. This caused inventory restrictions in the market,” explained Roberto Villalobos Acosta, CEO of OLX Autos México.
This has led to an increase in prices.
“In these weeks we have seen a lot of volatility in prices,” said Fernando Roldán, co-founder of Caranty, a new marketplace for buying and selling used cars. “In the US market, a $22,000 car now sells for more than $30,000. In Mexico, we have seen a similar phenomenon. Although the models have not risen as much, they have also appreciated,” he added.
What is needed for prices to normalize? The simple answer is that supply chain issues are resolved and new unit production returns to normal levels so that supply and demand can balance. But alleviating that shortage will not be easy.
“There is a massive shortage of components, caused by the lack of semiconductors, the shortage of labor, the allocation of steel and resin… There are many interruptions,” Gerardo Gómez, director of JD Power Mexico, said separately.
Industry insiders reckon it will likely be until the third quarter of 2022, or beyond, before the used car market begins to return to normal.
The consultancy KPMG estimates that the average price of used cars will fall between 20% and 30% in late 2022 and early 2023.
“As bottlenecks are resolved and production gaps are resolved, eventually we will begin to see normal pricing and inventory patterns,” Gomez concluded.
