In 2024, we’re seeing some of the highest prices for new and used cars that we’ve ever seen.
While some car owners are capitalizing on the moment, consumers are caught between a rock and a really expensive hard place!
But what exactly is behind these soaring car prices? In short, the spike in car prices are caused by:
- Microchip shortages
- Back-logged demand
- The war abroad
Let’s dive into each of these reasons so that we can understand why car prices are so expensive in 2024.
Will Car Prices Go Down In 2024?
According to research firm KPMG, used car prices are likely to remain high throughout 2024.
While many experts in the automotive industry predict car prices to drop in early 2025, they do not expect these prices to return to pre-pandemic levels.
With the effects of the pandemic on the supply chain starting to level down, the demand for used and new cars is expected to decrease.
The passing of the recent interest rate legislature will result in a cooling off of the used car prices nationwide too.
Why Are Cars So Expensive In 2024?
Microchip Shortages
Semiconductor chips (aka microchips) act as the central nervous system for modern vehicles.
They are the brain of your car and vehicles now require 40% more microchips than cars made before the pandemic — the average new vehicle possesses a whopping total of 298 semiconductor chips.
The worldwide microchip shortage is an effect of the 2020 coronavirus pandemic. Anticipating a decline in car sales, car manufacturers cut their microchip orders, which led to a reduction in microchip output from microchip manufacturers.
Though there was a spike in demand for microchips for other electronics, the number of manufacturers around the world is still low, which kept auto prices high.
Analysts expect the microchip shortage to continue until 2024, whereupon it will have seen an annual rise of 3.6%.Back-logged Demand
Because of supply chain issues, there were less cars available for purchase on dealership lots.
This created a “waiting list” of prospective car buyers — cars arriving to dealerships pre-sold and snatched up quickly!
With new cars being a rarity, buyers have turned their wallets to used cars. That increased demand has driven up the price of used vehicles even faster than the new ones.
As long as this low-inventory persists, the price of cars (both new and used) will remain high.
The War Abroad
War is rarely an act that only affects the parties directly involved and the current conflict in Ukraine is no exception.
Because of our global interconnectivity, we feel the effects of hostilities even if we’re far away. With their focuses on defending their homeland, Ukrainian war efforts have resulted in:
- Factories shut down and supply shortages: Some European car factories have shut down for the time-being due to a scarcity in auto parts they normally import from Ukraine. Volkswagen has halted production on its ID.4 electric vehicle due to the ongoing conflict.
- Raw material price spikes: Aluminum is found in the chassis and engine components of virtually every vehicle worldwide. Russia is one of the world’s chief suppliers of the metal. With sanctions placed on Russia (even if aluminum wasn’t mentioned within them) will likely impact the price of the metal abroad and here at home in the States.
- Increasing oil and gas prices: The global price of oil continues to rise, which means the cost of transporting auto components is also increasing. The continued rise of prices would ward off would-be car buyers.
Interestingly, all of these factors have also impacted the value of scrap cars, which are now netting higher auto prices than they did a few years ago.
Is Selling A Car Now A Good Idea?
If you have a car you want to get rid of, now is a great time to sell it.
Like we mentioned before, it’s a seller’s market right now. The shortages combined with the high demand create the environment to get a sizable profit from your vehicle.
If you need direction in how to evaluate and price your vehicle, click here for a guide to when to sell your used car.
Future Car Prices: A Dance Between Supply & Demand
The price of new and used cars and whether or not they’ll return back to “normal” is wholly dependent on supply and demand.
Should supply remain high and demand decrease, experts from KPMG say we could see a drop in auto prices between October 2024.
If demand remains high while the supply stays low, then experts estimate a return to more normal prices a few months later in January 2025.
While the majority of buyers want car prices to decrease sooner-rather-than-later, if the supply of new and used cars remains low and the demand for them follows suit, we won’t see that crash until April of next year.
The worst case scenario is supply being low and demand continuing to be high, which would force us to ride these increased prices until October 2025.
Where Can You Sell Your Car Right Now?
If you’re looking to capitalize on the current car prices and sell your car right now, contact CarBrain today!
CarBrain promises that we can pick up your vehicle in 24 to 48 business hours. When the tow truck driver arrives to pick up your car, you get paid on the spot. It’s that simple and that fast!
We’ve been in the damaged car industry for over a decade.
We have an experienced and knowledgeable team of car appraisers that can quickly calculate the value of your car.
Our cutting-edge system will always figure out a fair market price for your vehicle, no matter what condition it’s in.
If you ever need any help, you can contact one of our representatives assigned to every individual car we generate a quote for.
They walk you through the steps of getting a duplicate title, signing the title, comparing your options, and more.
All CarBrain offers are guaranteed for seven days. We never rush you to complete a sale, and we never bait and switch you with last-minute negotiations.
All payments are made by check delivered on the spot by the tow truck driver, which guarantees you always receive the full amount you’re quoted.
CarBrain believes in bringing transparency, honesty and reliability to the damaged car industry and every customer interaction.
When you want a reliable company, we can help you. No hidden fees, no haggle, no hassle, and no fuss.