Pandemic car shortages taught automakers the most valuable lesson in capitalism. Scarcity is more profitable than abundance. Build fewer cars. Charge more money. Watch idiots line up to pay above MSRP for a Chevy Traverse.
Used car prices remain elevated because manufacturers looked at empty lots in 2021 and thought "why did we ever build so many of these f*cking things?" They discovered—through no intelligence of their own—that desperate buyers will pay whatever number appears on the window sticker. No negotiation. No leverage. Just pure, beautiful seller's market conditions that would make a drug cartel jealous.
The chip shortage forced production cuts. Dealers sold through inventory in weeks. Customers paid markups that would embarrass a stadium hot dog vendor. Then the chips came back and executives faced a choice: return to the old model of cramming dealer lots with inventory, or keep supply tight and margins fat.
They chose margins. Shocking business acumen from an industry that spent forty years losing ground to Toyota.
Used car prices stay high because new car prices stay higher. The whole ladder moved up a rung. A three-year-old Honda Civic now costs what a new one did in 2019. Buyers tell themselves this is temporary. Market conditions will normalize. Supply will increase.
It will not increase. Automakers learned that building cars people can afford is for suckers. They watched Tesla charge $60,000 for a sedan with panel gaps you could mail a letter through. They saw buyers worship at the altar of scarcity. They took notes.
The pandemic ended. The strategy did not.
Retail traders keep refreshing Carvana hoping for a deal that exists only in their memories of 2018. They will wait forever. The car market found religion and that religion is "f*ck your budget."
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