How pandemic car shortages are still making new and used cars expensive

The shockwaves of the Covid-19 pandemic are still hitting the U.S. car market and pushing costs up, even for exceptionally previous cars.

The pandemic dealt a extreme blow to the overall provide of new cars, which has rippled all the way down to the used market.

About 8 million autos that might have been made for U.S. consumers throughout these years by no means had been, largely as a result of manufacturing shutdowns and provide shortages, mentioned Jeremy Robb, chief economist for Cox Automotive. Automakers confronted with curtailed manufacturing weighted their lineups towards money-making high-end autos, a technique they’ve largely continued.

These elements have been pushing up costs for everybody — even clients shopping for decade-old used autos.

“I feel it is sort of the new regular exterior of a giant financial influence,” Robb mentioned. “Provide isn’t getting loads higher over the subsequent three to 4 years.”

About 16.2 million cars had been bought in 2025, up from the pandemic-era low of 13.8 million in 2022, in keeping with the U.S. Bureau of Financial Evaluation. Cox is forecasting about 15.8 million autos will likely be bought in 2026, whereas JD Energy is predicting 16.3 million.

That is a major drop from the document 17.55 million autos bought in 2016.

Volumes had been already dropping earlier than the pandemic set in. The auto market is traditionally cyclical, so gross sales go up and down.

However JD Energy Senior Vice President Tyson Jominy mentioned the U.S. auto trade has bought roughly 16 million fewer autos than it might have if annual gross sales had held on the 2016 document of 17.5 million. That’s a couple of 12 months’s price of quantity gone — about half of it because the pandemic.

Fewer autos coming to the new market have constrained provide within the used one.

“A new automobile sale is the marble on the high of the mousetrap sport,” Jominy mentioned. “And if you drop that marble, it is going to undergo all of the chutes and ladders all the best way all the way down to the underside.”

Along with tighter provide, automakers and sellers have additionally in the reduction of on trade practices like leasing and incentives as a result of provide was so quick.

“Leasing is actually expensive for an OEM,” Robb mentioned, referring to the acronym that stands for authentic tools producer, one other identify for automakers.

Sometimes, funds are decrease for leases, there may be a number of upfront prices for the producer and when the car comes again it needs to be flipped into the used market, amongst different issues, he mentioned.

“The OEMs actually leaned into constructing extra worthwhile cars like trim ranges, vehicles, SUVs, issues like that,” Robb mentioned. “And people, they’re extra expensive. They have a tendency to not get leased as a lot.”

Off-lease autos are a giant pipeline for the used market. Previous to the pandemic, leasing was roughly 30% of the new automobile market, Robb mentioned. In 2022, it hit a low of 18%.

As a result of most leases are for 3 years, it has taken that lengthy for the used market to really feel the wave.

Automakers additionally do not wish to should low cost autos if they do not should. In the course of the pandemic, they did not must.

Incentives — primarily reductions on new cars — averaged about 9.5% of car costs throughout the new car market earlier than the pandemic, in keeping with Cox Automotive. In the course of the pandemic, they fell to a fraction of that. They’ve climbed again up, averaging about 6.5% to 7% in 2026, Cox’s Robb mentioned. However that’s still low in contrast with prepandemic ranges, and they are not represented evenly throughout the trade.

All which means that used car costs have stayed comparatively excessive.

In the meantime, customers are going through excessive gasoline costs, inflation and elevated bills throughout the board.

“Costs have gone up a couple of third and but salaries and earnings haven’t almost matched these will increase,” JD Energy’s Jominy mentioned. “There is a smaller group of consumers that may afford new autos. The typical new automobile family earnings is over $150,000 a 12 months versus about $80,000 for the U.S. economic system as a complete.”

Knowledge from Cox Automotive reveals that demand for even 9- and 10-year-old used autos is way increased than it has traditionally been. That signifies that extra customers are buying and selling down and searching for out ever-older and cheaper cars as costs rise.

“We do not usually see this type of pricing stress within the decrease finish of the market,” Robb mentioned.