Economic Lessons from Used Car Inflation

Provided by Nicholas Wealth Management

July 6th, 2021

Various factors drive used car prices.


Inflation is defined as the general upward price movement of goods and services in an economy. The key word is “general.” Inflation tends to be uneven and affects the price of some items more than others.


If you’ve been in the market for a used car, you’ve learned a critical economic lesson about the “uneven” side of inflation. The overall rate of inflation has been 5% for the past 12 months. Meanwhile, the average price of a used car is up 30% from a year ago.1,2


Various factors drive used car prices, but most of the trouble links to the global microchip shortage.3


Demand for used cars may well slow later this year as automakers return to normal production levels. As the market shifts, some people who bought used cars may learn another key economics lesson: they might owe more for their car than what it’s worth as prices return to historical levels.4


The most important takeaway is that inflation touches our lives in different ways. Gasoline prices are up sharply from a year ago, but you might not feel the increase if you work from home or are retired. However, at the grocery store, all shoppers are paying higher prices for everything from beef to pork to milk.5


If all the recent inflation talk has you uneasy, please contact our offices. We’d welcome the chance to hear about your experience with higher prices.




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Citations.

1. CarandDriver.com, June 5, 2021

2. APNews.com, June 22, 2021

3. ConsumerReports.org, June 10, 2021

4. Forbes.com, June 14, 2021

David Nicholas

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