Here's why car prices are expected to rise again

Vera Gibbons, Yahoo Finance contributor, explains the recent surge in new and used car prices.

Video transcript

AKIKO FUJITA: Well, if you have gone out to look for a used car lately, you know the pain so many drivers are experiencing. Prices have spiked roughly a quarter since September of last year, and there are no signs of a letup.

Let's bring in Vera Gibbons who, of course, Yahoo Finance contributor. And, Vera, we've been talking about this for the last year, but there seems to be a new wrinkle here that's going to only add to that price tag. How have some of the extreme weather events we've seen over the summer affected the prices?

VERA GIBBONS: Right. Well, we've had a lot of hurricanes. We've had a lot of flooding going on. So that is preventing some of these-- that's affecting the supply side of things.

I'm a little concerned about people actually going out to buy a used car and not even knowing that it has been in a flood because a lot of the cars who have been-- that have been in floods, maybe in Texas, for example, may be going to Massachusetts, may be going to New York, may be going to a market that hasn't been adversely affected, and a lot of people may end up buying these cars and not know that it's been damaged at all. So that's a whole nother concern that is exacerbating what's going on in the car market in general.

I mean, overall, it looked as though there was some relief in sight last spring, but then the Delta variant hit, and supply has been really damaged ever since. So we're seeing an abnormal supply of cars, an unusual amount of demand, and that's keeping prices high now and for the foreseeable future.

AKIKO FUJITA: And so that begs the question for those who are on a lease right now, their lease is coming up pretty soon. Read a lot about drivers who are looking to potentially just buy the car outright and flip it given the demand and the price tag these cars can command on the market right now. What's your advice?

VERA GIBBONS: That's actually not a bad idea. You know, I was speaking to somebody whose lease was up. He had a three-year lease on a Mercedes, and the dealership was actually looking to double what he was paying per month unless he was willing to actually go ahead and buy that car. So he did buy the car. He was in the process of buying the car, and he is, in fact, going to flip it because that is a way to actually make money, as he discovered.

So it's a very unusual situation out there. No new cars. No used cars. It's a very challenging time to actually buy a new or used car. It's a very challenging time to actually rent a car. But if you have a used car you're willing to sell, you could probably turn a pretty penny.

AKIKO FUJITA: Good advice there. I think a lot of people are thinking about that now.

Vera Gibbons, Yahoo Finance contributor, good to have you on the show today. Appreciate the time.