If you haven't noticed, the computer chip shortage that has automakers in a noose is having a long-term effect extending deep into the used car market. As new vehicles are few and far between this last year or so, America has created a giant bubble under the used vehicle market and it's bound to eventually pop.

Have you been shopping for a new or used vehicle lately? When new vehicles became so sparse that dealerships were practically empty last year, the dealerships did the only thing they could to prop up their business and local economies. They started buying up all the used vehicles they could in order to fill their lots for two reasons.

One, to make things look as normal as possible... car lots should be full of cars and such...

And two, to have something to sell in order to keep employees employed... but after months and months of the wildest and most glaring example of inflation our generation has seen, it has everyone wondering when it will all come crashing down.

Remember what happened to the housing market back in 2008? The keyword was sub-prime loan... With the promise of incentives and a building housing market, lenders were encouraged to mortgage houses to people that didn't qualify for them, and when the loans matured those variable rates, the people couldn't afford to pay their debt. A house that a person was paying $1000/month for was suddenly costing them $1500/month. The bubble popped.

Can you see the similarities between the different situations?

Because every auto dealer is still scrambling to have vehicles on their lots to sell, they're paying whatever they have to for used cars. It started at the vehicle auctions where bidding wars broke out over the most mundane vehicles. Something that normally sold for $5000 was now selling at $10,000. Instead of having a $5000 vehicle on the lot for $7500, dealers were now forced to price it nearly double the normal value.

As auto auctions spiraled out of control and vehicles have become thin, dealers have been asking the public to just outright sell their cars.

A friend of mine just successfully pitched three Lawton dealerships against each other in a bidding war for her used and abused truck with sky-high miles... The dealership that won her bid gave more than the original sticker price was five years ago when it was new.

This is not going to end well.

If you were able to find a new vehicle on the lots lately, one thing you might notice on the sticker is an additional charge called the "Market Adjustment." Some say it's supply and demand but in reality, it's a figure directly tied to inflation.

Worse yet, if you were tricked into buying a vehicle in the last eighteen months or so at some of these prime market-adjusted prices, when automakers finally do flood dealerships with new vehicles again, those values will plummet.

Logic suggests the truck my friend sold a local dealer for $36,000 will suddenly only be worth the current Kelly Blue Book value of $18,000...

So many questions remain... What's going to happen to the dealers when all these vehicles they've overpaid for have to sell at a loss? Will it bankrupt dealerships across the nation? Will this lead to yet another automotive bailout? What about the masses of people who will suddenly be very upside-down in their loans? Will inflation continue to skyrocket until these hyper-values seem normal?

I can't tell you. Nobody can tell you. While I've lived through five "once in a lifetime" bailouts in my 30-ish years, this is the first one the entire world can see coming.

On the flip side of this, when the bubble does burst it'll be a buyers market... Dealers might practically beg you to buy just to make room for new inventory on their lots.

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