THE REAL REASON CARS ARE SO EXPENSIVE

Of course this is mere speculation on behalf of us at RCO Cash for Cars but it really is the most practical breakdown of what will happen.

As with most markets, pricing is always based on supply and demand. So how did we get here? How did the new and used car markets go into disarray?

FACTS—

1. Covid did slow down production of New Vehicles in 2020.
2. There was an earthquake that slowed computer chip production.
3. Biden printed a ton of currency.

With the above facts pricing was pretty much status quo going through 2020. Price influx didn’t start until 1st – 2nd quarters of 2021. What basically happened was states started opening up and with people having more cash on hand to purchase vehicles, new cars started selling off quickly which caused a demand for used vehicles. Newer used car inventories are typically supplied from lease returns. As lease returns were coming back from their customers, because of the increased demand the banks financing the leases were making lots of money as the residuals were much greater than the forecasted return values. Once the manufacturers and banks started making more money on the back side they realized they could finance new vehicles at or above sticker sticker price. It was the perfect storm for car manufacturers and banks. Make more money on new car sales with less inventory while making money on all existing lease returns. So why increase production now and ruin a good thing?

With all markets, good things will come to an end. Currently we are now in mid 2022, banks are still getting pre-covid lease vehicles from leases. (Remember leases from 2018, 2019 and 2020 that will be selling above contract buy-outs which means returns can potentially come in selling above market through 2023 into 2024). As the volume of returns slows, residuals become less profitable for manufacture financing companies. When that happens, manufacturers will need to ramp up production to move new car sales to make money. Once they ramp up production, used cars should fall to pre-covid.

Our prediction, as the Democrats lose the house and senate come November and the US Economy falls deeper into recession, the New and Used car markets will start to stabilize come the 3rd quarter of 2023. If you dont have the money or dont need a new vehicle right now, hold out till next summer/fall. You’ll see a huge difference then.

If you need to sell a vehicle and are looking to cash out. RCO Cash for Cars will get you the best possible price for your car, truck or van. Simply complete the form below and we will get back to you with a no hassle price that includes free pickup!