New and used car prices in the USA are reaching record levels and showing no signs of softening. While customer appetite for cars continues to grow, tight inventories and tangled supply chains are making it difficult for auto companies to keep up with the demand.
The new car prices have spiked up 20% over the past year in the USA while the nation’s economy continues to struggle due to the whirlwind caused by the COVID-19 pandemic. The global microchip shortage has slowed down the production of new cars, and even the used ones are available at a hefty price. As travel ramps up, the rental car companies are struggling to meet up the exasperating demand as they sold off most of their vehicles in hot used-car market in 2020 to survive during the challenging times. An extremely low interest rate on car loans offered by the companies is adding to the high demand for cars in the USA, where auto loans account for 9.5% of American debt, second to mortgage and student loans. So, the strong customer appetite for new cars, fewer vehicles on dealer lots, tight inventories have resulted in an average transaction price rise. Besides, tangled supply chains are making it difficult for companies to keep up with the demand. The prices of new cars could go even higher as the global semiconductor manufacturing shortage appears to be worsening on account of increased demand for electronics.