The microchip shortage combined with high demand resulted in a shortage of new vehicles. The production of some new vehicles was impacted by the chip shortage, and buyers who wanted these models might have turned to the used market to find a similar option.
As buyer demand increased and inventory remained low, prices rose higher. In fact, the average price of a new car is now more than $48K. The price of used vehicles is falling, though. Buyers who need a new or used vehicle might wonder when inventory will be normal. When will the shortage end?
The Impact Will Linger Into 2023
While not every manufacturer or model will be impacted by the chip crunch, car buyers might find that their cars don’t offer some features because of the lack of microchips. In Japan, Toyota is limiting smart keys for its cars.
Is there an end in sight? Kelley Blue Book (KBB) reported that the chip shortage should ease in 2023. Once chips become available again, hopefully production (and prices) will go back to some semblance of normalcy.
How to Shop During a Shortage
The chip issue will likely continue to impact inventory for a bit longer. This might leave buyers wondering how they are supposed to find a new car at a reasonable price. Since supply is down and demand is up, prices at dealerships might not budge too much.
As KBB noted, the old rules of car shopping and procuring deals might not be applicable. In the past, car buyers could shop at the end of the month or the end of sales quarters to try to score better deals. There also were a few other tricks of the deal that buyers might have followed, too.
However, if car dealerships don’t have many models on the lot for popular cars, the prices will likely reflect the low availability. How are buyers supposed to find the best prices?
In some cases, buyers might not be able to procure a lower price. However, buyers who are focused only on price also could make adjustments related to the vehicle they are purchasing.
KBB explained that Chevrolet and Ford have decent inventory of some models, while Toyota, Kia and Honda have tighter inventory. Meanwhile, Jeep and Ram have more inventory and might be the best brands for a deal per KBB.
Don’t Forget the Trade-In
Car buyers who are shopping during a period of tight inventory and higher prices also could utilize the value of their trade in to help decrease the price of their new vehicle. However, in some cases a trade-in might not be as valuable as the car owner might assume.
KBB explained that some vehicles aren’t in as much demand as others. The site noted that car owners with pricier models might not get as great of a deal as a car owner with a more economical vehicle.
Unfortunately for car owners with newer models or luxury SUVs, the trade-in offer might not be as rewarding. However, car owners could see what other dealerships are willing to pay; if car owners don’t like one dealership’s trade-in offer, they could look elsewhere.
Car owners also could use Kelley Blue Book to better understand the value of their trade-in. Car owners can use the VIN, license plate number or just the make/model/year to begin the valuation process. Car owners will need to select their car’s color, trim and other features and details. They also will need to note the car’s condition.
KBB will then show car owners a trade-in value estimate and a range, too. In addition, car owners also can view the car’s resale value (this is the price the owner could get if they sold the car privately).
How to Find the Deals
While some brands and dealerships might have limited inventory, others might be trying to move inventory off their lot to make space for newer models. There could be incentives offered by dealerships related to low APR financing (to qualified buyers) or lease deals, too.
To find these incentives, car shoppers can check out their local dealerships’ websites. Dealerships will likely include lease or APR deals online. Incentives might vary by region and/or model.
Shopping Used Car Models Also Could Be an Option
As the production of some new models was impacted by the chip shortage, car buyers might have decided to shop used/pre-owned models to find a similar vehicle. While the average sale price of new models is now more than $48K, used vehicles also could be a less expensive option for budget buyers.
However, even used vehicle prices were high during peak buyer demand. The price of used cars is still more than seven percent higher than last year.
Buyers who need bargain low prices might need to select older vehicles with a car with higher mileage to keep the price in their budget. Buyers who don’t need a new vehicle ASAP might take their time to find the right car (and the best price).
There are numerous sites that car buyers can use to find cars in their area that meet both their driving needs and their financial constraints, too.
Buyers can see local inventory and also explore the price that others paid for the same car. The easy to use tool lets buyers research their options and better understand how much they might expect to pay.
When the Car Isn’t Available
Buyers might realize that the car with the features that they want isn’t available in their area. Some in-demand models could be tough to procure for buyers.
In some cases, buyers might decide that they are willing to forego certain features. Maybe they wanted a specific model in red but the dealership only has it available in black. Buyers might need to decide if they are willing to purchase a car that isn’t exactly what they want.
In the past, buying a car meant that the consumer could specify all the features they wanted and opt for a specific color for the exterior and interior, too. If dealerships have low supply of a popular model, buyers might find that they can find what they can find. Some buyers are willing to make concessions, but perhaps others are not willing to accept a less than perfect vehicle.
Dealerships could be willing to order a particular model specific to the buyer’s request. However, this might not be an option via every dealership. Buyers who opt to special order a vehicle also might want to inquire about the timeframe for delivery.
Look at Comparable Models
During a car shortage, buyers might need to look at other options, too. Again, certain models and brands could have been hit harder than others.
Many brands, though, offer similar vehicles that compete with each other. For example, the Toyota RAV4 and the Honda CR-V are similar in style and price.
Buyers might not be able to find the exact model with every feature they need. If they aren’t willing to sacrifice specific features, are they willing to look at other brands or models? By expanding the car search to a different brand and model, they might be able to get exactly what they want.
In areas that are impacted by the shortage, buyers might decide to make a list of multiple car models they like. They can search for prices and availability of each model and determine their best options. They could find that their top choice is available with all the features they want, or they might need to look at their second or third options.
As Kelley Blue Book explained in a story related to car prices, some brands might not be struggling with inventory; Jeep and Ram are two brands that might still have deals for buyers. In addition, the site noted that the Ford Expedition and the Chevrolet Tahoe aren’t selling far from their sticker price.
Car Shortage and Higher Prices
Unfortunately for those who need a car, the shortage continues. However, not all brands or models are equally impacted. Again, some dealerships might have plenty of inventory of certain models.
For high-demand models that the dealerships can’t seem to keep in stock, though, buyers might see higher prices. Before jumping into the car buying adventure, buyers can look at their budget to determine how much they are able to spend.
Since prices might be higher than normal, the model that a buyer wants could be out of the price range. Searching via the used market might be an option for those who don’t have the budget for a higher-priced model. In addition, the used market also could help buyers find the car they really want (if newer models are in short supply).
The shortage will eventually ease, though. Prices will hopefully come down and the car shopping process might look closer to normal. For buyers who can wait, perhaps biding time could be the best option to find a car deal and the best prices.