For the second straight year, used vehicle prices are skyrocketing nationally and in Alaska.
Cars that fetched $15,000 before the pandemic now sell for around $23,000, after Alaska prices spiked more than 50% since 2020, according to federal data.
The surging costs sharply outpace other commodities amid widespread national inflation. And they’ve turned the Alaska car market upside-down.
Used vehicles can sell for more today than they did two years ago — unheard of before the pandemic, sellers say. And with supply low, it can take months to find a car. Many buyers say they’re paying thousands of dollars more than they hoped, on high-mileage cars and trucks.
Barbara and Marty Leichtung flew to Anchorage from Homer, where they live, to find the car they needed, a 2016 Honda CRV they’d found on an earlier trip. They picked it up last week, after Continental Honda needed time to do maintenance work on it.
The couple paid about $27,000, said Marty Leichtung, a retired North Slope oil field worker.
The car would have sold for less than $20,000 before the pandemic, a salesman said.
“That’s a lot of money for a 2016 car, but that’s the market these days,” Leichtung said.
The search took a few months because there weren’t a lot of CRVs, he said. The car has 85,000 miles, but it should last for years, he said.
The couple could have bought a new CRV for $8,000 more, he said. But he stuck with a used car to stay frugal, with the U.S. economy shaky, he said.
“This is not a good time to be taking too much money out of your savings,” he said.
‘A mint for a car’
Auto dealers say the problem is rooted in the limited supply of new cars, underscored by empty showrooms at dealerships.
Delays in the manufacturing and shipping of microchips and other automotive parts, caused by the COVID-19 pandemic, continue to reduce the availability of new vehicles, they say.
That has reduced the number of vehicles that once replenished the used-car market in Alaska.
“It’s a direct impact from COVID,” said Jose McPherson with Good Guys Auto Sales, located off Gambell Street 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 cars hard to buy — they need to be ordered months in advance — car rental companies and individuals hold on to their existing vehicles, further reducing supply, McPherson and other dealers said. Adding to the problem are small-time entrepreneurs that rent vehicles through Turo, snatching up second-hand vans and other used vehicles.
Dealerships, getting less trade-in vehicles, say they are increasingly buying cars at highly competitive Lower 48 auctions. Add in auction fees and costs to ship the car to Alaska, and sticker prices can rise well above listed prices in Kelley Blue Book and other guides, they say.
The prices are turning some buyers away, McPherson said last week over the phone, as he placed bids at an online used-car auction in Washington state.
“The prices are high, but it’s not because I want to make a mint on every car,” McPherson said last week. “It’s because I’m paying a mint for a car.”
On the other hand, people with a car to sell can get good deals.
This spring, Wasilla resident Sean Fitzpatrick traded his 2018 Ford Edge SUV to an Anchorage dealer for $24,500. That was $500 more than he’d paid for it two years ago, 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 said. “And it had cosmetic damage, door dings, a crack in the windshield and tail light.”
Cars that get so much wear and tear don’t normally rise in value, he said.
“This market is pretty frickin’ ridiculous right now,” said Fitzpatrick, who commutes from Wasilla to Anchorage to work for the Alaska Department of Corrections.
In return, Fitzpatrick bought a 2020 Nissan Maxima for $30,000, a decent price, he said. It was the full-size sedan he wanted.
But it took nine months to find it.
“There just weren’t a lot of options,” he said. “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 lucky.
Amanda Toorak, a city employee in the Northwest Alaska village of Kaktovik, paid close to $36,000 for a 2015 Jeep Wrangler in May. It had 70,000 miles on it, she said. She found it after a month of searching in Fairbanks and Anchorage.
“It’s pretty crazy how high the prices are now,” she said. “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 said getting her car to the village will require a barge shipment across the Arctic Ocean, adding more than $4,500. But she needs the Wrangler to haul supplies and relatives to the beach for whale hunts that could start in August, she said.
Used cars a ‘weird outlier,’ even during widespread inflation
Used car prices in Alaska and the U.S. have jumped higher than most other commodities as inflation hits levels not seen in decades, said Neal Fried, an economist with the Alaska Department of Labor and Workforce.
“It’s been a weird outlier,” he said.
The yearlong inflation rate for Alaska in April jumped 7.5%, according to federal data. But used car prices in Alaska jumped 23.1%, while new vehicle prices rose just 3.1%.
Used car prices rose even more the year before, from a period of stability.
The national used car market also has seen surging prices since 2020, Fried said.
The price spikes, at least recently, have challenged the adage that cars quickly lose value, he said.
Dealers say they’re seeing more people priced out of the used car market.
“You can’t even find anything decent for under $10,000 any more,” said Vito Ungaro, owner of Vito’s Auto Sales off Muldoon Road in northeast Anchorage.
Before the pandemic, he sold most cars for around $15,000. Now, it’s more than $20,000, he said.
The higher car prices, and rising interest rates, push borrowing costs higher. Gas prices are also squeezing budgets, he said. They hit a record $5.61 per gallon in Alaska recently, according to the Alaska Automobile Association.
“When you increase the cost of a car by $3,000 to $5,000, it’s tough for people,” he said.
‘Why would I pay that for a used car?’
Marten Martensen, owner of Continental Auto Group with lots off Old Seward Highway in Anchorage, said some customers are balking at the high prices for used cars.
“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 said.
With supply chain snarls continuing to delay car manufacturing, customers ordering new cars typically wait around three months for them to arrive, he said. In May, a shipment to Alaska of 25 new Nissan vehicles was canceled at the last minute, he said.
“I don’t blame the manufacturers,” he said. “They want to sell cars. But the supply chain is so broken.”
Martensen said with new cars in low supply, the company places a bigger emphasis on selling used cars.
But overall inventory is down, and so are sales and profits, he said. He now employs about 180 people, 70 less than before the pandemic, he said.
He said one bright spot is people keep their cars longer, buoying Continental Auto’s repair business.
“The service and parts side is carrying us now,” he said.
Martensen said he hears from manufacturers that it could be two years before the new car market recovers.
Fried, the economist, said that could help stabilize the used car market. And if the U.S. economy enters a recession, that could reduce demand for used cars, creating downward pressure on prices, Fried said.
No one knows when, or if, that will happen, Fried said.