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

AI Market Analysis

The article highlights persistent supply constraints in the U.S. auto market, stemming from pandemic‑induced shutdowns and a shift toward higher‑margin models. Reduced new‑car production limits the “marble” that feeds the used‑car pipeline, keeping both new and used vehicle prices elevated. This structural shortage may pressure consumer discretionary spending and could dampen demand for auto‑related equities, especially manufacturers heavily reliant on volume sales. Sectors such as auto parts suppliers and financing arms may also feel strain as higher vehicle prices compress margins and reduce loan volumes.

For investors, the environment suggests a cautious stance on traditional auto stocks and a potential tilt toward alternative transportation or EV manufacturers that can command premium pricing. Meanwhile, commodities linked to vehicle production—steel, aluminum, and semiconductor components—could see mixed effects: demand remains robust but supply bottlenecks may keep prices volatile. Overall, the outlook points to continued price pressure in the auto market over the next few years, with limited upside for volume‑driven players.

Original Article

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 prices up, even for exceptionally old cars.
The pandemic dealt a severe blow to the total supply of new cars, which has rippled down to the used market.
About 8 million vehicles that would have been made for U.S. buyers during those years never were, largely due to production shutdowns and supply shortages, said Jeremy Robb, chief economist for Cox Automotive. Automakers faced with curtailed production weighted their lineups toward money-making high-end vehicles, a strategy they have largely continued.
These factors have been pushing up prices for everyone — even customers buying decade-old used vehicles.
“I think it’s kind of the new normal outside of a big economic impact,” Robb said. “Supply is not getting a lot better over the next three to four years.”
About 16.2 million cars were sold in 2025, up from the pandemic-era low of 13.8 million in 2022, according to the U.S. Bureau of Economic Analysis. Cox is forecasting about 15.8 million vehicles will be sold in 2026, while JD Power is predicting 16.3 million.
That’s a significant drop from the record 17.55 million vehicles sold in 2016.
Volumes were already dropping before the pandemic set in. The auto market is historically cyclical, so sales go up and down.
But JD Power Senior Vice President Tyson Jominy said the U.S. auto industry has sold roughly 16 million fewer vehicles than it would have if annual sales had held at the 2016 record of 17.5 million. That is about a year’s worth of volume gone — about half of it since the pandemic.
Fewer vehicles coming to the new market have constrained supply in the used one.
“A new vehicle sale is the marble at the top of the mousetrap game,” Jominy said. “And when you drop that marble, it’s going to go through all the chutes and ladders all the way down to the bottom.”
Leasing and incentives
In addition to tighter supply, automakers and dealers have also cut back on industry practices like leasing and incentives because supply was so short.
“Leasing is really expensive for an OEM,” Robb said, referring to the acronym that stands for original equipment manufacturer, another name for automakers.
Typically, payments are lower for leases, there can be lots of upfront costs for the manufacturer and when the car comes back it has to be flipped into the used market, among other things, he said.
“The OEMs really leaned into building more profitable cars like trim levels, trucks, SUVs, things like that,” Robb said. “And those, they’re more expensive. They tend not to get leased as much.”
Off-lease vehicles are a big pipeline for the used market. Prior to the pandemic, leasing was roughly 30% of the new vehicle market, Robb said. In 2022, it hit a low of 18%.
Because most leases are for three years, it has taken that long for the used market to feel the wave.
Automakers also don’t want to have to discount vehicles if they don’t have to. During the pandemic, they didn’t need to.
Incentives — essentially discounts on new cars — averaged about 9.5% of vehicle prices across the new car market before the pandemic, according to Cox Automotive. During the pandemic, they fell to a fraction of that. They’ve climbed back up, averaging about 6.5% to 7% in 2026, Cox’s Robb said. But that is still low compared with prepandemic levels, and they aren’t represented evenly across the industry.
All this means that used car prices have stayed relatively high.
Meanwhile, consumers are facing high gas prices, inflation and increased expenses across the board.
“Prices have gone up about a third and yet salaries and income have not nearly matched those increases,” JD Power’s Jominy said. “There’s a smaller group of buyers that can afford new vehicles. The average new vehicle household income is over $150,000 a year versus about $80,000 for the U.S. economy as a whole.”
Data from Cox Automotive shows that demand for even 9- and 10-year-old used vehicles is much higher than it has historically been. That indicates that more consumers are trading down and seeking out ever-older and cheaper cars as prices rise.
“We don’t normally see this kind of pricing pressure in the lower end of the market,” Robb said.

Source: CNBC Business

Disclaimer: this content is informational analysis only and does not constitute investment advice.