Prices skyrocket for new, used cars as demands grow for consumers

PHILADELPHIA (WPVI) -- It is the unofficial start of the car-buying season, and consumers are continuing to experience sticker shock for both new and used vehicles.

Prices for new cars are up more than 10%. Prices for used cars are up 40% year-to-year.

And folks looking to buy entry-level vehicles, those who probably least can afford these big spikes, are the ones being impacted the most.

"The average list price right now for a used vehicle is $28,000. That's the average, which is very high for our vehicles. We've never seen anything like that," said Emilie Voss of Carfax.

Automakers continue to struggle to get computer chips and other essential materials due to supply chain problems.

Ford Motor is cutting or suspending production at eight of its factories this week.

"These record prices are here to stay for at least a while. The hope is maybe by the second half of the year things might level out," she said.

But until then, buyer beware, especially if you're looking for an economy vehicle.

"Even those inexpensive, smaller compact cars or five, six-year-old vehicles are now going for top dollar as well, said Aaron Bragman, Cars.com Detroit bureau chief.

The largest price increases are in vehicles under $10,000 as demand for those vehicles is highest. Yet, in many cases, it is entry-level vehicles that are getting cut from production, carmakers choosing instead to focus on their more profitable, luxury models, which means lower-income buyers are the ones getting priced out.

Here are some tips when shopping for a used vehicle: number one, it is more important than ever to get the vehicle history report.

"That might give you a little wiggle room on negotiation. So maybe the vehicle has a minor accident in its past, and it's been properly repaired, you can get a great buy on an accident vehicle, you just want to understand that vehicle's history," said Voss.

Also, try to avoid a sedan. Sedans have increased in price the most over the last year. And no matter what you're looking for, be flexible.

"I know, I want an SUV with the third row as opposed to going into it. It has to be this make model in this color," said Voss.

And think outside your neighborhood.

"Look outside your immediate area. Sites like cars.com are great for finding vehicles that are not necessarily in your town but maybe somewhere in your state or maybe even around the country," said Bragman.

Used car buyers should not only get a vehicle history report but also have it looked at by a trained mechanic.

It will cost about $100, but that is money well spent. It can save a life as well as money in the long run.

While consumers are struggling with the prices, carmakers and dealerships are benefiting with record earnings and revenue in many cases.

It will be interesting to see if this shift will change the car industry for good. Some predict they will never go back to the output they had pre-pandemic since making fewer cars is giving a big boost to their bottom line.