New Car Manufacturing Disruption Causes Ripple Effect in Used Car Market: How Dealers Are Adapting to Meet Demand

Eyo Toe | May 4, 2023

Kelley Blue Book recently wrote an article on the ripple effect of new car manufacturing disruption and how that will affect the used car market in years to come. Here are some of the highlights from the article: 

  • The pandemic caused production shutdowns and supply chain disruptions, resulting in a decrease in new car production and an increase in demand for used cars as people sought to avoid public transportation.
  • The microchip shortage has further limited the supply of new cars, forcing consumers to turn to the used car market and driving up prices even more.
  • Another factor contributing to the shortage of used cars is the decrease in new car leases during the pandemic, which typically flood the used car market with inventory when they expire.
  • The article predicts that the situation will not improve anytime soon, as the microchip shortage is expected to continue through 2023 and demand for cars is likely to remain high due to ongoing concerns about public transportation.
  • However, there may be some relief for consumers in the form of increased incentives for new car purchases, as dealerships attempt to entice buyers away from the used car market.

As demand for used cars remain high, used car dealers will need to get creative in finding ways to maintain an affordable realistic customer payment. A Lease-Here, Pay-Here program gives dealers a flexible option to provide their customers with newer reliable transportation for a lower monthly payment and without sacrificing profitability to the dealer. The residual value in a lease is just one lever a dealer can pull to get their customer to a payment that makes sense to them. On average, a LHPH payment will be about $100 less than a BHPH payment on the same vehicle. 

Want to learn everything you need to know about leasing and what it takes to start your program? Download our e-book to learn more about Lease-Here, Pay-Here!