Part 5/9:
In retrospect, the motivation behind this surge in car prices extends beyond market fluctuations. The onset of the pandemic triggered an immediate vehicle demand shock while simultaneously constraining supply due to production shutdowns and global semiconductor shortages. These factors have led to a staggering reduction in available new cars, feeding into the classic economic principle of supply and demand—less supply justifies more substantial prices.
Compounding this dilemma is the ubiquitous financial literacy gap among average consumers. Many buyers were unaware of the true financial implications of their purchases, often financing vehicles without regard to the inflated prices, contributing to the critical state of negative equity today.