- COVID-era shutdowns left automakers building millions fewer vehicles.
- Pandemic price spikes hit new cars first, and used values followed.
- Average incentives remain below the levels seen before COVID arrived.
More than six years after COVID-19 landed, the US car market is still paying for it, and nowhere more than in the used-vehicle aisle. Today’s supply of late-model used cars depends on what got built years ago, and that’s where the trouble starts. The shortage hitting dealer lots now traces straight back to the factories that went dark in 2020 and 2021. Things are unlikely to change anytime soon, either.
Production shutdowns and critical supply shortages meant approximately 8 million fewer vehicles were built during the COVID-19 years for the US market. Buying a new car was harder at the time, prompting manufacturers to shift their focus toward higher-end models with better margins, which in turn drove a significant spike in average new car prices.
Read: New Car Prices Fell In May, But High-End Luxury Buyers Paid $8,700 More Than Last Year
In the years since, these vehicles have started to trickle into the used market, making them also more expensive. Although car production has rebounded since the pandemic, the industry has yet to return to historical highs, CNBC notes.
Sales Rebound, But Not Enough
US sales fell to a low of 13.8 million in 2022, with 2025 achieving a healthier 16.2 million units sold. This year, they are expected to remain steady between 15.8 million and 16.3 million, but still down from the 17.55 million new cars sold in 2016. According to JD Power senior vice president Tyson Jominy, the US has sold roughly 16 million fewer cars than it would have if annual sales remained steady at 17.55 million over the past decade.
Incentives Are Also Down
New vehicle incentives are also down from pre-pandemic levels. Before the COVID-19 outbreak, these averaged around 9.5 percent, fell significantly during the pandemic, and have only recently begun to recover, currently averaging between 6.5 percent and 7 percent. Recent global economic uncertainty, heightened by the war in Iran and rising gas prices, has also had broad impacts across the car industry, including the used car market.
“Prices have gone up about a third and yet salaries and income have not nearly matched those increases,” Jominy added. “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.”
