Here’s an interesting video from the Your Advocate Alliance (YAA) YouTube channel that at first glance looks unrelated to car enthusiast circles or sports car-related themes.
We all know that the Great Chip Shortage has affected the market and thus the buyer on the street for some time, regardless of if we are purchasing a new car or not.
But there could be another type of phenomenon that’s likely to leave a lasting imprint in the new and used car industry, and it might make waves also felt in the sports car segment. Everyone has heard the analogy of a bubble bursting in relation to an economy or industry and this video breaks down the US car market with some interesting conclusions.
The US Car Market Bubble Is About To Burst
Not everyone is an economics major or even aware of how the car industry works on a meaningful level, so it’s best to watch the short breakdown in the video above for an understanding.
The host opens with a look at car prices, firstly used car prices, saying that the average value has gone down significantly in the last year alone. This is despite car prices being super-inflated over the last 18 months or so.
With some more data, he shows that at the end of 2021 the wholesale car price index for 2-6-year-old cars was up around 50%. Now, at the precipice of 2023, car prices look to be falling and there are signs of more to come.
A quick example shown in the video is a Tesla Model X that falls from a $72,000 list price to $58,000. This car listing price history can get found at the bottom of a lot of online used car listing sites.
What To Do When Car Prices Drop In 2023
Demand is waning due to a few things and we see what the conclusion is to the problem. As inventory levels finally rise again following the chip shortage and production problems, higher interest rates for new cars and fewer people buying used cars means that there is an imbalance.
Interest rates are likely to remain the same or climb further, which will put people off new cars, but the supply of second-hand cars is also ostensibly at pre-pandemic levels, which means that there is a perfect storm for the car market in the US right now.
The conclusion is that this trend will continue for now with the way things sit, so as car manufacturers introduce more incentives it can make sense to do a little research before you buy a new car for the best deal available.