If you're at all plugged into the automotive world, whether because you're looking at used cars or because you're a professional, then you've likely noticed that the prices for end-of-life vehicles (also known as junk cars) have skyrocketed recently.
In this article, we'll break down the reasons for this increase, how it relates to the COVID-19 pandemic, and where that might leave you.
How did the Pandemic Affect the Junk Car Market?
Due to its essential role in the economy, the junk car businesses mostly stayed open even when the COVID-19 pandemic first reached the United States. Nevertheless, the pandemic did have a significant financial impact on the junk car industry, most notably by raising the prices of junk cars.
An important bit of context is that prices on junk cars were already starting to rise before the pandemic hit the United States. This was due to new tariffs on imported steel and aluminum, which made the domestic scrap metal from junk cars in the U.S. a more desirable commodity.
Initially, junk car businesses suffered financial losses like many other businesses, since customers were choosing to let their unusable cars rust in their driveways rather than risk virus exposure by going in person to sell the car. But after the initial industry losses in the early stages of the pandemic, the junk car sector has made a relatively strong recovery.
This has much to do with the junk car sector's investment in e-commerce. Junk car businesses have done a great deal of work to establish an online presence and maintain accessible, convenient platforms for selling your junk car online. For obvious reasons, this has been a very attractive option to cautious consumers during the pandemic.
Prices may only increase. With the increasing popularity of e-commerce and also the fact that many potential junk car sellers may be feeling more confident to sell now, there could be a greater boom in junk car sales in the future.
Why Are Used Cars So Expensive Right Now?: 2021
Used car market trends 2021 have been staggering. Junk cars have been soaring in price because people are keeping their functional used cars for longer. This might sound counterintuitive-after all, how would the market for used cars affect end-of-life cars? Most importantly, you may be wondering, "When will used car prices drop again?"
The answer is that used cars are directly related to junk cars-in that they need junk cars to be maintained, or can become junk cars if they aren't maintained. For various reasons, all connected to COVID-19, people are keeping used cars in circulation for longer, which simultaneously decreases the supply of junk cars and increases the demand for them.
Because the automotive market is vast and interconnected-the market conditions of new cars affect those of used cars, which affects those of junk cars-any change in one part of the industry will have a ripple effect on the others. And since the COVID-19 pandemic, there have been many, many ripples.
Higher Prices for New Cars
For two pandemic-related reasons, new cars have been staggeringly expensive.
The first reason is that many car buyers are making the purchases that they put off during the financial uncertainty at the start of the pandemic, making new car prices rise. The second is that, due to increased demand for electronics related to the pandemic, there's a shortage of microchips that are essential for many new cars.
Both of these factors have driven new car prices through the roof, which has forced many would-be new car buyers to buy used cars instead. The influx of new customers has made used cars very hard to come by.
Fewer Used Cars on the Market
Exacerbating this shortage is the fact that the pandemic had already caused a used car shortage.
When the pandemic began in the spring of 2020, travel flatlined-which meant that car rental companies, like other travel firms, were put in dire straits. To compensate, rental car companies sold off large portions of their fleet.
But as travel has rebounded in 2021, these companies now have a shortage of their supply and aren't selling used cars like they ordinarily would. This means that even as the demand for used cars has increased, the supply has decreased.
Why More Used Cars Means Higher Junk Car Prices
The upshot of all of these factors is that used cars are in far higher demand, are seeing more use, and are being kept for longer.
On the one hand, this means that fewer cars are being left to rust and become junk cars. On the other hand, it means that many people want the spare parts from junk cars to maintain their used cars, making them a hot commodity.
As a result, the market for junk cars has been ballooned by low supply and high demand, making prices soar.
Frequently Asked Questions
How much have junk car prices risen?
In 2021 alone, the average market price for junk cars has risen over 40%, from just over $380 to $545. However, especially valuable junk cars like the Honda Civic can fetch upwards of $600.
How can I find out current junk car prices?
While you can consult your local scrapyard on what they might be willing to pay for a junk car, you can also do some research ahead of time to figure out what current junk prices are.
Junk Car Medics, for example, maintains a chart that tracks the state of junk car prices and the industry in general.
What junk cars can I get the most money for?
Again, the answer depends on your local scrapyard. However, among the most commonly scrapped cars, the Toyota Camry, Honda Civic, and Nissan Altima-three of the most valuable junk cars, on average-have been especially valuable lately.
The Auto Industry At-Large
With the myriad effects of the pandemic, the entire automotive industry has seen some tremendous changes-and this has culminated in a surge in junk car prices.
For that reason, the time to sell a junk car may well be now.
You can learn more by checking out this article on Covid's impact on Vehicle Recycling that our owner Todd Bialaszewski was interviewed in.