The pandemic car shortage continues to push up the prices of new and used cars

The shockwaves from the Covid-19 pandemic are still hitting the US auto market and pushing prices up, even for exceptionally old cars.

The epidemic dealt a severe blow to the total supply of new cars, which extended to the used market.

About 8 million vehicles that were slated to be built for American buyers during those years were never made, largely because production was halted and supply shortages, said Jeremy Robb, chief economist at Cox Automotive. Automakers faced production cuts and weighted their lineups toward high-end, money-making cars, a strategy that has largely continued.

These factors have led to higher prices for everyone – even customers buying decade-old used cars.

“I think it’s kind of a new normal outside of the big economic impact,” Robb said. “The supply is not going to improve much over the next three or four years.”

About 16.2 million vehicles were sold in 2025, up from a pandemic-era low of 13.8 million in 2022, according to the US Bureau of Economic Analysis. Cox expects about 15.8 million cars to be sold in 2026, while JD Power expects to sell 16.3 million cars.

This represents a significant decline from the record 17.55 million vehicles sold in 2016.

Volumes were already declining before the pandemic hit. The automobile market is historically cyclical, so sales rise and fall.

But Tyson Jomini, senior vice president of J.D. Power, said the U.S. automaker sold roughly 16 million fewer vehicles than it would have had annual sales remained at 2016’s record of 17.5 million. This equates to about a year of lost volume – about half of it since the pandemic.

The decline in the number of cars coming into the new market has restricted supply in the used market.

“Selling new cars is like the marble at the top of the mousetrap game,” Jomini said. “And when that marble falls, it’s going to go through all the chutes and ladders all the way to the bottom.”

In addition to the tight supply, automakers and dealers also cut back on industry practices like leasing and incentives because supply was so short.

“Leasing is very expensive for OEMs,” Robb said, referring to the abbreviation for original equipment manufacturer, another name for automakers.

Payments are usually lower for leases, he said, there can be a lot of upfront costs to the manufacturer, and when the car returns, it has to be moved to the used market, among other things.

“OEMs really tend to build more profitable vehicles like trim levels, trucks, SUVs, things like that,” Robb said. “And those are more expensive. They tend not to rent as much.”

Off-lease vehicles are a large pipeline to the used market. Before the pandemic, leasing represented roughly 30% of the new car market, Robb said. In 2022, it bottomed out at 18%.

Since most leases are for three years, it took a long time for the used market to feel the wave.

Automakers also don’t want to have to discount vehicles if they don’t have to. During the pandemic, they didn’t need to.

Incentives — essentially rebates on new cars — averaged about 9.5% of vehicle prices across the new-vehicle market before the pandemic, according to Cox Automotive. During the pandemic, their number has dropped to a fraction of that. They are up again, averaging 6.5% to 7% in 2026. But that’s still low compared to pre-pandemic levels, and they’re not evenly represented across the industry, Cox Robb said.

All this means that used car prices have remained relatively high.

Meanwhile, consumers are facing higher gas prices, inflation and increased expenses across the board.

“Prices have risen by about a third, yet salaries and incomes have not nearly matched those increases,” J.D. Power’s Jomini said. “There is a smaller pool of buyers who can afford new cars. The average household income from new cars is more than $150,000 per year versus about $80,000 for the U.S. economy as a whole.”

Cox Automotive data shows that demand for 9- and 10-year-old used cars is much higher than it has been historically. This indicates that more consumers are trading in cars and looking for older, cheaper cars as prices rise.

“We don’t typically see this kind of pricing pressure at the lower end of the market,” Robb said.