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New or used? Either way, price hikes squeeze US auto buyers

ap photo In this image made from video, a worker washes a Jeep inside the service department of a LaFontaine auto dealership in Fenton Township, Mich., on Jan. 28. A chain reaction touched off by the coronavirus pandemic has pushed new-vehicle prices to record highs and dramatically driven up the cost of used ones.

FENTON TOWNSHIP, Mich. — The viral pandemic has triggered a cascade of price hikes throughout America’s auto industry — a surge that has made both new and used vehicles unaffordable for many.

Prices of new vehicles far outpaced overall consumer inflation over the past year. In response, many buyers who were priced out of that market turned to used vehicles. Yet their demand proved so potent that used-vehicle prices soared even more than new ones did.

The price of an average new vehicle jumped 6 percent between January of last year, before the coronavirus erupted in the United States, and December to a record $40,578, according to data from Edmunds.com.

Yet that increase was nothing next to what happened in the used market. The average price of a used vehicle surged nearly 14 percent — roughly 10 times the rate of inflation — to over $23,000. It was among the fastest such increases in decades, said Ivan Drury, a senior manager of insights for Edmunds.com.

The main reason for the exploding prices is a simple one of economics: Too few vehicles available for sale during the pandemic and too many buyers. The price hikes come at a terrible time for buyers, many of whom are struggling financially or looking for vehicles to avoid public transit or ride hailing because the virus. And dealers and analysts say the elevated prices could endure or rise even further for months or years, with new vehicle inventories tight and fewer trade-ins coming onto dealers’ lots.

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