The COVID-19 pandemic has affected every area of people’s lives, across our country and throughout the world. Many millions were locked down in their homes and had to work remotely. Most children were unable to attend school and had to resort to distance learning for their educations. Businesses shut down to prevent the virus from spreading. First responders and healthcare workers put themselves at risk to keep us safe. Nearly everyone has been touched in some way by this terrible ordeal.
While all this was happening, a curious phenomenon was taking place in the junk car industry.
We previously wrote about how Covid caused an increase in junk car prices.
But we wanted to take a dive at the underlying factor; The demand for used car parts has soared during the pandemic.
Why? We’re glad you asked!
Let’s go back to those dark days of 2020…
The national awareness that COVID-19 was a large-scale killer on the loose first dawned on us in March of 2020. That’s when things began to shut down. Retail and manufacturing operations of all types were closed by government decree. If there was no one out there buying, what was the point of making things to sell them?
The auto industry was no different. Factories shut down and dealerships closed (except for their service departments). To avoid even larger losses, the car manufacturers and other suppliers cancelled their orders of raw materials and other items. This included the auto parts that were needed not only for new vehicles, but also for those older vehicles that required replacement parts when theirs wore out. Car sales dropped by 30%. It seemed to many “experts” that these dark days would last for a long, long time.
In the junk car business, things were very much the same. People put off junking their cars, either letting them sit or fixing them up just enough to keep driving them. What would be the point of replacing their cars if they were going to be stuck at home for a long time with nowhere to drive?
But a funny thing happened a few months in…
After the initial lockdown period, the demand for vehicles returned. Many businesses continued to operate, and their employees had to go to work on a regular basis. Vehicles were still needed. New vehicles, used vehicles, and commercial vehicles were in demand. But supplies were tight because of the factory shutdowns. The massive parts order cancellations did not help.
Suddenly, both vehicles and parts were in short supply. This trickled down to used car parts, which are typically marketed thru salvage yards. Thanks to the lack of parts production, demand was outstripping supply. If you couldn’t get a new replacement part, your only option was a used one – from a junk car!
At the same time, the average car on the road was getting older…
The latest research from IHS Markit revealed that the age of the average light vehicle in operation (VIO) has increased to 12.1 years old! This means that there are more older cars running around – and older cars need more maintenance, which requires more parts.
How did this happen? It’s really simple math:
- There were 14.5 million cars and light trucks sold in 2020
- 12 million vehicles were retired (that means taken off the road and junked)
- The total number of VIO was up to 286.9 mil – an increase of 0.8%
But because the number of cars that were junked was less than the number of new cars sold, the average vehicle’s age went up. In fact, the fastest-growing segment is now: Vehicles that are 16 or more years old!
There are several reasons for this, besides the “pandemic parking” situation. Vehicles are more reliable, so people keep them longer. Widespread job losses, unemployment and lower incomes also led people to hang onto their cars. These owners are seeking cost-effective ways to keep their older cars running, which creates a strong demand for used parts. The COVID lockdowns boosted online sales of just about everything, used auto parts included.
Other factors include an increasing number of young drivers creating a need for more vehicles per household, as well as a COVID-fueled reluctance to ride mass transit, leading to additional “commuter car” purchases. The vehicles purchased for these needs are very often used, not new cars.
Meanwhile, prices for scrap cars have skyrocketed…
We are now experiencing a “perfect storm” situation across the entire automotive landscape. The microchip shortage has cut into new car production while demand is very strong, causing strong ripple effects at every level:
- New car inventory is scarce, with new vehicles selling at or above sticker prices
- New car buyers are now considering used cars, boosting demand and pushing used car prices way up – the prices of Hondas and other desirable used-car brands are through the roof!
- Rental car companies sold off a large part of their fleets to stay afloat when the pandemic first hit – now they have no nearly-new cars to feed into the used car market
- Traditional price-conscious used car buyers are seeking out older, more maintenance-intensive cars they can afford
- Current owners of older cars are keeping them longer, pushing up demand for (and prices of) used parts
- COVID lockdowns greatly reduced driving, resulting in fewer accidents and many less total-loss vehicles for used parts recyclers to sell for parts
- Higher used parts prices are sending increasing numbers of junk cars to used parts recyclers, instead of directly to the crusher
It's possible to sell a junk car for $500 currently.
What does this mean for those looking to scrap cars?
These trends are very good news for you!
Many cars that used to only be worth their scrap metal value are now worth more as donor cars for their valuable scrap car parts. Because of the increasing age of the average car, as well as the boom in demand for parts for older cars, your junk car has increased in value and the automobile recycling industry is booming. This means that it’s a great time to contact Junk Car Medics and cash in!
Act now – these favorable junk car price trend won’t last forever!
The automotive industry is doing all it can to return to normal production volumes. The microchip shortage will eventually end and new car production will return to its former levels. There will be plenty of new car inventory, dealers will return to dealing, and used car pricing will revert to previous levels. Used car buyers will be able to buy vehicles that are not as old and that need less maintenance. This will very likely affect the junk car industry, reducing used parts demand in the future. There is just no telling when that will be.
The automobile recycling industry will always be necessary as they handle the process of actually scrapping the cars after they are sold.