With used-car prices soaring, retailer CarMax has been busy swooping up used vehicles to flip for sale.
That could be a solid strategy since the chip shortage has left new-car dealers bereft of vehicles on the lot.
CarMax said it has bought 236 percent more cars this year than last, leaving it with 40,000 vehicles in inventory — and that’s still 10,000 down from last year, according to Bloomberg.
“They are often pleasantly surprised with a higher offer than they anticipated,” Jim Lyski, executive vice president of corporate strategy, marketing and product for CarMax, said to Bloomberg about the company’s customers. “We would expect pricing to stay elevated in the near term.”
Dealers are desperate for product — new or used — to sell. So desperate, according to Bloomberg, that even so-called “clunkers” are fetching more money. Bloomberg cites Edmunds in reporting that cars with between 100,000 and 109,999 miles are going for an average of $16,489, up 31 percent from last year. Pickup trucks with high odometer readings are more valuable than other high-mileage cars, with Silverados and F-150s selling for over 40 percent more than last year.
As you might know, dealers use auctions to source used cars, in addition to taking vehicles in on trade. But even the auctions aren’t providing sanctuary, as their inventory is about one-third what it was two years ago.
For CarMax, the strategy of buying up used cars makes obvious sense — while the competition has barren lots, the retailer will be able to entice consumers to its showrooms, thanks to inventory, and still charge a premium since supply is tight.
When the market madness stops, no one knows. One economist quoted by Bloomberg said the spring’s stimulus checks, combined with tax-refund season, drove demand, and that demand might cool off. On the other hand, the chip shortage continues unabated.
That, plus cheap financing and the ability to get good money for trade-ins, both of which allow consumers to pay the high prices being asked, means that the sky-high pricing for cars, new and used, could be with us for a while. One forecaster suggests the high prices will remain for the rest of the year.
Forecasts are just that — and they can turn out wrong. That said, while the future is uncertain, in the present, you might still be considered insane if you want to buy a used car.[Image: Gunter Nezhoda/Shutterstock.com]
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