Alaska used automobile costs run amok in a ‘ridiculous’ market

For the second straight 12 months, used car costs are skyrocketing nationally and in Alaska.

Automobiles that fetched $15,000 earlier than the pandemic now promote for round $23,000, after Alaska costs spiked greater than 50% since 2020, in keeping with federal data.

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The surging prices sharply outpace different commodities amid widespread nationwide inflation. And so they’ve turned the Alaska automobile market upside-down.

Used autos can promote for extra at the moment than they did two years in the past — remarkable earlier than the pandemic, sellers say. And with provide low, it may possibly take months to discover a automobile. Many consumers say they’re paying hundreds of {dollars} greater than they hoped, on high-mileage automobiles and vehicles.

Barbara and Marty Leichtung flew to Anchorage from Homer, the place they dwell, to search out the automobile they wanted, a 2016 Honda CRV they’d discovered on an earlier journey. They picked it up final week, after Continental Honda wanted time to do upkeep work on it.

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The couple paid about $27,000, mentioned Marty Leichtung, a retired North Slope oil area employee.

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The automobile would have offered for lower than $20,000 earlier than the pandemic, a salesman mentioned.

“That’s a lot of money for a 2016 car, but that’s the market these days,” Leichtung mentioned.

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The search took a couple of months as a result of there weren’t lots of CRVs, he mentioned. The automobile has 85,000 miles, nevertheless it ought to final for years, he mentioned.

The couple might have purchased a brand new CRV for $8,000 extra, he mentioned. However he caught with a used automobile to remain frugal, with the U.S. economic system shaky, he mentioned.

“This is not a good time to be taking too much money out of your savings,” he mentioned.

‘A mint for a car’

Auto sellers say the issue is rooted within the restricted provide of recent automobiles, underscored by empty showrooms at dealerships.

Delays within the manufacturing and transport of microchips and different automotive components, brought on by the COVID-19 pandemic, proceed to cut back the provision of recent autos, they are saying.

That has lowered the variety of autos that when replenished the used-car market in Alaska.

“It’s a direct impact from COVID,” mentioned Jose McPherson with Good Guys Auto Gross sales, situated off Gambell Road in downtown Anchorage. “It’s supply chain issues. It’s the lack of microchips and raw materials to make cars. It’s the lack of individuals to produce the products. It’s kind of a perfect storm, unfortunately.”

With new automobiles laborious to purchase — they must be ordered months upfront — automobile rental firms and people maintain on to their current autos, additional decreasing provide, McPherson and different sellers mentioned. Including to the issue are small-time entrepreneurs that lease autos via Turo, snatching up second-hand vans and different used autos.

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Dealerships, getting much less trade-in autos, say they’re more and more shopping for automobiles at extremely aggressive Decrease 48 auctions. Add in public sale charges and prices to ship the automobile to Alaska, and sticker costs can rise effectively above listed costs in Kelley Blue E-book and different guides, they are saying.

The costs are turning some consumers away, McPherson mentioned final week over the telephone, as he positioned bids at a web-based used-car public sale in Washington state.

“The prices are high, but it’s not because I want to make a mint on every car,” McPherson mentioned final week. “It’s because I’m paying a mint for a car.”

Alternatively, folks with a automobile to promote can get good offers.

This spring, Wasilla resident Sean Fitzpatrick traded his 2018 Ford Edge SUV to an Anchorage seller for $24,500. That was $500 greater than he’d paid for it two years in the past, after he put 50,000 miles on it.

“That was a huge shock to me, because it had 85,000 miles when I sold it,” he mentioned. “And it had cosmetic damage, door dings, a crack in the windshield and tail light.”

Automobiles that get a lot put on and tear don’t usually rise in worth, he mentioned.

“This market is pretty frickin’ ridiculous right now,” mentioned Fitzpatrick, who commutes from Wasilla to Anchorage to work for the Alaska Division of Corrections.

In return, Fitzpatrick purchased a 2020 Nissan Maxima for $30,000, an honest value, he mentioned. It was the full-size sedan he needed.

But it surely took 9 months to search out it.

“There just weren’t a lot of options,” he mentioned. “I think I came across maybe nine vehicles in the category I was searching for, and most had 50,000-plus miles or cosmetic issues.”

Others aren’t so fortunate.

Amanda Toorak, a metropolis worker within the Northwest Alaska village of Kaktovik, paid near $36,000 for a 2015 Jeep Wrangler in Could. It had 70,000 miles on it, she mentioned. She discovered it after a month of looking out in Fairbanks and Anchorage.

“It’s pretty crazy how high the prices are now,” she mentioned. “I mean if I knew the prices would be this high, I would have purchased a car a couple of years ago and it could have been $20,000 less.”

Toorak mentioned getting her automobile to the village would require a barge cargo throughout the Arctic Ocean, including greater than $4,500. However she wants the Wrangler to haul provides and kin to the seashore for whale hunts that would begin in August, she mentioned.

Used automobiles a ‘weird outlier,’ even throughout widespread inflation

Used automobile costs in Alaska and the U.S. have jumped increased than most different commodities as inflation hits ranges not seen in many years, mentioned Neal Fried, an economist with the Alaska Division of Labor and Workforce.

“It’s been a weird outlier,” he mentioned.

The yearlong inflation fee for Alaska in April jumped 7.5%, in keeping with federal data. However used automobile costs in Alaska jumped 23.1%, whereas new car costs rose simply 3.1%.

Used automobile costs rose much more the 12 months earlier than, from a interval of stability.

The nationwide used automobile market additionally has seen surging costs since 2020, Fried mentioned.

The worth spikes, at the least lately, have challenged the adage that automobiles rapidly lose worth, he mentioned.

Sellers say they’re seeing extra folks priced out of the used automobile market.

“You can’t even find anything decent for under $10,000 any more,” mentioned Vito Ungaro, proprietor of Vito’s Auto Gross sales off Muldoon Street in northeast Anchorage.

Earlier than the pandemic, he offered most automobiles for round $15,000. Now, it’s greater than $20,000, he mentioned.

The upper automobile costs, and rising rates of interest, push borrowing prices increased. Fuel costs are additionally squeezing budgets, he mentioned. They hit a report $5.61 per gallon in Alaska lately, according to the Alaska Vehicle Affiliation.

“When you increase the cost of a car by $3,000 to $5,000, it’s tough for people,” he mentioned.

‘Why would I pay that for a used car?’

Marten Martensen, proprietor of Continental Auto Group with tons off Previous Seward Freeway in Anchorage, mentioned some clients are balking on the excessive costs for used automobiles.

“They come in the store and say I paid that for my new car, so why would I pay that for a used car?” he mentioned.

With provide chain snarls persevering with to delay automobile manufacturing, clients ordering new automobiles sometimes wait round three months for them to reach, he mentioned. In Could, a cargo to Alaska of 25 new Nissan autos was canceled on the final minute, he mentioned.

“I don’t blame the manufacturers,” he mentioned. “They want to sell cars. But the supply chain is so broken.”

Martensen mentioned with new automobiles in low provide, the corporate locations an even bigger emphasis on promoting used automobiles.

However general stock is down, and so are gross sales and income, he mentioned. He now employs about 180 folks, 70 lower than earlier than the pandemic, he mentioned.

He mentioned one vivid spot is folks maintain their automobiles longer, buoying Continental Auto’s restore enterprise.

“The service and parts side is carrying us now,” he mentioned.

Martensen mentioned he hears from producers that it might be two years earlier than the brand new automobile market recovers.

Fried, the economist, mentioned that would assist stabilize the used automobile market. And if the U.S. economic system enters a recession, that would scale back demand for used automobiles, creating downward strain on costs, Fried mentioned.

Nobody is aware of when, or if, that may occur, Fried mentioned.

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