by The pandemic-era car shortage still affects the market
More than six years have passed since the start of the COVID-19 pandemic, but the American automotive market still feels its effects. This is most noticeable in the used car sector. Today’s supply of nearly-new vehicles depends on what was produced years earlier, and that is where the problem lies. The shortage currently seen on dealer lots traces back to the factories that shut down in 2020 and 2021. The situation is unlikely to change anytime soon.
Lost millions and rising prices
Due to production halts and a critical shortage of components, approximately 8 million fewer vehicles were manufactured for the US market. Buying a new car back then was difficult, so manufacturers focused on more expensive, higher-margin models, causing a significant increase in average new car prices.
In the following years, these vehicles began entering the used car market, making them more expensive as well. Although production resumed after the pandemic, the industry has not yet returned to its historical highs, notes CNBC.
Sales are recovering, but not enough
New car sales in the US fell to a low of 13.8 million units in 2022. In 2025, the figure rose to 16.2 million. This year, sales are expected to remain between 15.8 and 16.3 million, which is still below the 17.55 million sold in 2016. According to Tyson Jominy, senior vice president at JD Power, the US has sold approximately 16 million fewer cars over the last decade than it could have if annual sales had remained at the 17.55 million level.
Incentives have also decreased
Incentives for new car buyers have also fallen compared to pre-pandemic levels. Before the COVID-19 outbreak, they averaged around 9.5%, dropped significantly during the pandemic, and have only recently started to recover, reaching 6.5-7%. The latest global economic uncertainty, exacerbated by the war in Iran and rising gasoline prices, has also had a broad impact on the automotive industry, including the used car market.
“Prices have risen by about a third, but wages and incomes have barely kept up with this growth. The group of buyers who can afford new cars has become smaller. The average household income for those buying a new car exceeds $150,000 per year, while the average for the US economy is around $80,000,” Jominy added.
This situation creates a vicious cycle: a smaller number of new cars produced in the past leads to shortages and higher prices on the used car market today. High new car prices and limited incentives make them less accessible to a wide range of buyers, which in turn supports high demand for used cars. The recovery of the market to pre-crisis levels seems likely to drag on for a long time, as it requires not only ramping up production but also overcoming structural changes in the purchasing power of the population. Economic and geopolitical factors only add uncertainty, slowing the process of price stabilization for both new and used cars.
