Schools and businesses around the country are reopening.
Businesses are reopening with limited capacity.
Schools offer online options.
Nothing seems to be the same as it was a year ago.
But policymakers often tell us everything will be normal soon. Either herd immunity or a vaccine will overcome COVID-19.
One economic indicator shows that those policymakers are wrong. Some of the changes we’ve experienced are permanent, and they can’t even guess what the new normal will look like.
Check out the Manheim Used Vehicle Value Index below. Prices of used cars are up 15.8% compared to a year ago.
Used Car Prices +15% in a Year
Source: Manheim.com
Gains as the economy recovers are normal. The chart shows that prices of used cars jumped after past recessions. In 2009, prices increased 19.9% in the year after bottoming.
This time, the index is more than 30% above its lows in just four months.
One reason prices go up in a stronger economy is that demand increases. But that’s not the case right now.
Cox Automotive estimates that used vehicle sales volume was down 4% year-over-year in August. Generally, decreased volume in sales leads to lower prices as dealers respond to the market.
What Used Car Demand Tells Us
Customers are responding to something other than the laws of supply and demand. Used cars offer a solution to some of the problems the coronavirus pandemic created.
Residents are leaving cities where public transit is available, and that is pushing up demand for used cars. Some people are wary of using public transit.
These concerns extend beyond crowded public transit. Individuals are worried about crowds whether they are in buses, restaurants, movie theaters or anywhere else.
Unless demand for used cars drops, the economy will never be the same.
Businesses, schools and cities must adapt to a new normal where avoiding crowds is worth premium prices.
Michael Carr is a Chartered Market Technician for Banyan Hill Publishing and the Editor of One Trade, Peak Velocity Trader and Precision Profits. He teaches technical analysis and quantitative technical analysis at New York Institute of Finance. Mr. Carr is also the former editor of the CMT Association newsletter, Technically Speaking.
Follow him on Twitter @MichaelCarrGuru.
