New reports suggest that used car prices have dramatically increased. According to the National Automobile Dealers Association, the average price of a used car climbed by 12.5 percent from last year to this year, with average prices going up from $21,020 in February 2020 to $23,643 in February 2021.

Rising rates of vaccinations in many parts of the country along with many states beginning to reopen many businesses, combined with the distribution of the third-round of direct federal stimulus payments worth up to $1,400 – which have now totaled over $386 billion – have helped to jumpstart the American economy by boosting both consumer spending and household income. This in turn has led to a greater demand for car purchases, as people increasingly begin to reenter the world. This is a major turnaround from a year ago, when car sales reached their lowest figure since the Great Recession following a 30% drop in the second quarter of 2020.

The increase in demand, however, has coincided with supply problems in the automotive industry. A global chip shortage has left automakers, who use chips for a variety of complex electrical and computerized functions in cars, in a bind. Many car companies have had to slow or halt production and lay off workers, and new car production in North America is down by about 3.4 million cars in the first three months of the year.

Perhaps also complicating matters are concerns over possible labor shortages. Debates in the U.S. about the continued efficacy of federal unemployment benefits have picked up recently, with some arguing that these benefits are disincentivizing workers from reentering the workforce. The resulting labor shortages are threatening to harm supply, as manufacturers struggle with not just an insufficient workforce but also with a lack of access to needed materials.

As the supply of new cars decreases, prospective car buyers are increasingly being forced to enter the market for a used car, resulting in a seller’s market that has pushed up used car prices. Industry experts have speculated that the overall upward trend in car prices is likely to continue as pandemic recovery continues, with some predicting that car prices will continue to increase even after the pandemic has subsided, albeit at only a moderate but steady rate.

Eli Fuhrman is a contributing writer for The National Interest.