MEMPHIS, Tennessee — Visited a store, lately?
Notice how prices on everything have gone up groceries, meats, produce, gas, and clothing.
The list goes on and on, and it includes cars.
We understand how difficult it may be to stretch your dollars.
That's why our Verify team is here to help you understand why you are paying so much more.
THE QUESTION:
Are used cars today more expensive than their newer models?
THE SOURCES:
Karl Brauer with iseecars.com
Dr. Ernie Nichols with the University of Memphis
The Consumer Price Index from the U.S. Bureau of Labor Statistics
THE ANSWER:
Yes, you will find that some cars will cost more used versus their current for sale new model, especially popular and in-demand models.
Experts we talked to agree, several factors are to blame, and all of them are because of the COVID-19 pandemic.
Rental car companies needed cars as more people resumed traveling since the pandemic began. In 2019, many companies sold their fleet because of the reduction in travel.
Supply chain issues created a problem as factories shut down because of COVID.
The microchip shortage is another reason why.
WHAT WE FOUND:
Right now, analysts and experts say the automotive industry is still hurting, even as most automobile plants that shut down at the start of the pandemic have come back online.
The biggest factor to blame for the low supply of new and used cars is the microchip shortage.
"We had a shift in the global microchip supply that went from the auto industry, that went into the personal electronics industry," said Karl Brauer, Executive Analyst with iseecars.com. "People were stuck at home buying cell phones, computers."
The ABC 24 Verify team learned why those interruptions had an impact on car sales and the price that you pay.
"The reason pretty much anytime you see a situation where prices are high, it comes back to a supply and demand issue," said Dr. Ernie Nichols, an Associate Professor, Department of Marketing & Supply Chain Management at the University of Memphis.
What this means is the demand for new and used cars exceeds the available supply.
And that means sticker shock for you, as prices have surged to record-breaking levels for both new and used cars.
"Of course, if you got a used vehicle that you're thinking of trading in and you can't find a new car or because it's not available, then you don't trade in your used vehicle and the used supply is crimped," said Brauer.
The U.S. Bureau of Labor Statistics has tracked this price surge.
Used cars and trucks rose 2.5% in October after falling in August and September.
In October, the new vehicle index increased by 1.4%, marking the seventh consecutive monthly increase.
Used car and truck prices are up nearly 32% from just a year ago.
iseecars.com also looked at the shrinking price gap between new and used cars.
Analysts found in Memphis and the Mid-South, used car models like the Tesla Model 3 and Model Y cost between $11,000 and $13,000 more used than new.
The used Toyota Tundra and Tacoma trucks models are about $5,000 more than newer models.
A used Dodge Challenge is about $4,000 more than a newer model.
Used Toyota Rav4s and Honda Civics also cost about $3,000 more than newer models.
"THIS IS A RARE EVENT"
Nichols said many issues are the result of the pandemic.
"This isn't the result of, you know, any governmental administration. This is not your dealership trying to gouge you on price," said Nichols. "It's a matter of supply and demand."
Nichols added until the supply returns to normal levels, you can expect to pay higher prices.
So, what can you do in the meantime, if you have to buy a car or want to trade-in your car?
Nichols recommends you shop around to make sure you get the best deal, especially offers for trade-ins.
For new cars, dealers may not offer incentives, but they may offer you more for your trade-in, or better financing terms.