CLIVE, Iowa — A computer chip shortage has led to the production of new cars slowing down, meaning fewer of them at dealerships.
A trickle-down effect has caused used car prices to increase.
"It's a long ways from last year," Marty Engelen, General Manager at the used car dealership Car City West, said.
Since January, the price of used cars and trucks on his lot has steadily increased due to a shortage of new cars, and some of them have increased by $3,000 to $5,000 or more.
In April, the price of used vehicles rose once again.
"So basically what it was, a correction by the loan institutions and the books that kind of give us guidelines on what the cars should be valued at," Engelen said. "That's what escalated it all in one big jump."
What the price indicators are showing is shocking.
Right now on his lot, Engelen has a Nissan Altima with a sticker price of $10,995. However, a year ago, he noted the same car there would have been in the $8,000 range.
"I've been doing this about 36 years, and at this point that 36 years experience I might as well throw my hands in the air for the value of a car," he said. "I go to the auctions and think I should be able to buy it here [at a lower price] and it's here [a higher price.]"
Joshua Rosenbloom, a professor of economics at Iowa State University, said the increase in prices is what should be expected when there is a shortage, like a computer chip, in the supply change.
"I don't think they're going to keep prices high," he said. "I think that as conditions in the new car market improve we will likely see prices come down … we've probably seen most of the increase we're going to see."
Though he knows prices will eventually level out, Engelen said operating during this period is worrisome because he does not want to get a bunch of vehicles and end up stuck with them due to low demand.
"My job as a buyer is to play somewhat defense," Engelen said. "Defend on getting a loss on the car, or getting too high on the car, where no one will buy it."
He has not seen a drastic increase or decrease in sales since the prices increased, but did note it is a seller's market.