COLUMBIA — Used car prices remain so high they’re enticing more potential buyers to drive past lots, some Columbia-area dealers said.
Recession fears and rising interest rates appear to have hampered the used-car market this summer, according to Don Cook, managing partner of Palmetto Cars of Columbia, a dealership on Augusta Road in West Columbia.
“The market has completely disappeared over the past 30 days,” Cook said.
Over the past three weeks, Cook said he would have expected to sell around 15 cars on average. He only sold one.
Consumers may have heard enough about a looming recession, rising car prices and interest rates to decide to stay home, Cook said.
Middle-class shoppers are conserving the cash they have and limiting all purchases, including cars, said Don Jones, owner of Meeting Street Motors in West Columbia.
“They’re hurting,” Jones said.
Used cars continue to get more expensive, says automotive research website iseecars.com.
The average selling price of a used car in South Carolina rose 16.6% in May 2022 from the same month a year earlier, according to the website. The average SC car buyer spent $4,907 more than in 2021.
Limited production of new cars during the COVID-19 pandemic has reduced options for buyers, forcing used car prices to rise sharply, said Matt Laughridge, managing director of Dealers Auto Auction at Columbia, which auctions wholesale cars to dealerships.
Automakers cited a shortage of semiconductor chips for automotive electronics and other supply chain issues for the drop in production.
Automakers continue to produce fewer new cars, which means in some cases buyers will pay more than the list price for a year-old used car, Laughridge said.
This used car is available in the field for customers to buy, instead of having to wait several months for a new out-of-stock car, he said.
Wholesale car prices have actually fallen over the past two months, Laughridge said, which may reflect shoppers spending their money on necessities rather than buying cars.
Another sign that could mean a slowing economy is that more cars are being seized due to missed payments.
The number of cars taken back by wholesalers appears to have increased by around 15%, Laughridge said.
“As gasoline prices rose, so did the repo rate,” he said.
Although the cars are available for purchase, the prices are higher and the cars offered tend to have more mileage and defects.
Before the pandemic, new car dealers didn’t try to resell a trade-in over 150,000 miles, but instead turned it over to wholesalers.
Now new-car dealerships are selling those cars themselves to maintain inventory in the field, Laughridge said.
Car dealerships that primarily focused on used cars have had to lean more into the used side of the business due to supply, dealership owner Peter Boulware said.
Big dealers have had to get creative, either using a waiting list for new cars or seeing if a used car will meet buyers’ needs, said Boulware, owner of a Toyota dealership in West Columbia.
“They’re incredibly patient,” he said.