The parts shortage and the resulting lack of brand new vehicles has been a major problem for automakers and new-car dealers alike but it’s affecting used car sales in an interesting way. Prices are higher of course, but what might surprise you is that mileage is higher too and many dealerships are now in the business of selling used cars with six-figure odometer readings.
Many factors are at play but perhaps none as prominently as the parts shortage. Dealers across the nation and across different segments and demographics are struggling to get enough stock to sell to new-car customers. The decline has caused those same dealers to rethink how they approach the used-car side of the business.
In the past, it wasn’t uncommon for the vast majority of higher mileage trade-in vehicles to be shipped off to auction instead of kept on the lot for resale. Dealers could make a few quick bucks and invest nothing into the used car while continuing to focus on new-car sales. Now they’re keeping them to sell themselves.
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Dealers don’t seem to be offering much more than in the past for trade-ins but they do know that resale values can provide space for profit. That’s not all bad though because as a recent report in Automotive News points out, cars are lasting longer than ever before. It’s not unusual at all to see cars that have 100,000 or even 200,000 miles or more selling for well beyond $10,000 or more.
At the same time, there is a risk to new-car dealers that have changed their thinking and are willing to sell these higher mileage vehicles. For one, their reputation is on the line. Many buyers won’t hesitate to hold an unreliable vehicle against the dealer that sold it, even if it did have 200,000 miles on the clock when they bought it.
That brings up the second risk which is the investment in the vehicle itself. High mileage used vehicles require one degree or another of reconditioning so that the dealer itself is more likely to make a sale and less likely to disappoint a customer. One thing seems to be clear though and that’s the fact that used car pricing isn’t about to drop to pre-pandemic levels anytime soon.
