Why Is There A Microchip Shortage
The worldwide shortage of microchips came as a result of the COVID-19 pandemic. Demand fell, carmakers stopped production at the same time that demand increased for microchips for electronics that consumers used for working, schooling, and passing the time at home during the early days of lockdowns and quarantines.
But the auto market bounced back quickly. As demand picked up, the chip shortage remained, pausing and slowing the construction of many new vehicles. Some experts believe the car chip shortage will last well into 2022.
Since automakers were working with a limited supply of microchips to build new cars, they used what supply they could find to build the models that make them the most money. That means affordable cars are now the most challenging new cars to find.
Yet Americans continue to snap up all the cars automakers can build. New research from Kelley Blue Book parent company Cox Automotive shows that 66% of new car buyers are happy with their shopping experience despite the record-high prices.
That gives automakers little reason to lower prices. Last year, General Motors CEO told reporters that Americas largest automaker would never go back to pre-pandemic inventory levels.
Still, we all have transportation needs. The COVID-19 pandemic pushed more drivers into car ownership. People now believe that owning a car is the best way to get around.
That isnt great news for car shoppers seeking a deal.
Dealer Sales And The Buyers Guide
Dealers have to display a Buyers Guide in every used car they offer for sale. They also have to give it to buyers after the sale. This includes light-duty vans and trucks, demonstrators, and program cars. Demonstrators are new cars that havent been owned, leased, or used as rentals, but have been driven by dealer staff. Program cars are low-mileage, current-model-year vehicles returned from short-term leases or rentals. Dealers dont have to display a Buyers Guide on motorcycles and most recreational vehicles.
The Buyers Guide tells you
- the major mechanical and electrical systems on the car, including some of the major problems you should look out for
- whether the car is being sold as is or with a warranty
- what percentage of the repair costs a dealer will pay under the warranty
- to get all promises in writing
- to ask to have the car inspected by an independent mechanic before you buy
- to get a vehicle history report and to visit ftc.gov/usedcars for information on how to get a report, how to check for safety recalls, and other topics
- to ask for a Spanish Buyers Guide if the sale is conducted in Spanish
- the dealers contact information, including the contact for complaints
- to remember: spoken promises are difficult to enforce
Dealers in Maine and Wisconsin display their own version of the Buyers Guide.
Negotiate The Best Price
Heres the part that everyone dreads: negotiation. But it doesnt have to be stressful, particularly if youve done your research and have a good idea what the car you want is worth. Compare the sellers asking price to the average market price you determined on the pricing guides. Chances are, the seller is asking more than the market average.
Lets say the seller is asking $12,000 and your research has told you the car is worth only $10,500. Start by pointing out any concerns you have about the cars condition. For example, you can say, I like the way the car drives. But it really needs a new set of tires. And besides that, the book value is only $10,500. So Id be willing to buy it for $10,000.
Now, its up to the seller to either accept your offer or make a counteroffer. If his counteroffer still seems too high, you can either stick to your guns or invoke the time-honored phrase, Ill meet you halfway, and split the difference. You can go back and forth until you agree.
When you bargain with a car salesperson at a car lot or dealership, keep in mind that you’re dealing with a pro who knows all the tricks.
Here are a few tips to use on the car lot:
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How To Close The Deal
It might sound silly, but its a good idea to practice your negotiating skills before you negotiate with a car dealership or with an individual seller. If youre not feeling particularly assertive, you can always bring a more aggressive or confident friend, or focus on how much money you can save over time by standing your ground.
After New Model Releases
New model releases, especially after a new generation or redesign is out, can persuade people to trade in their old vehicles for the shiny new ones. The sudden surplus of slightly-used and CPO vehicles can create a lot of supply and little demand, prompting dealerships to lower prices and offer incentives to move older versions of the car.
The effectiveness of this approach depends on the specific make and model of the new release. Popular cars generate more buzz, getting more sales and turnover with previous model year trade-ins. In other words, if youre looking for a new car thats coming out with a major upgrade or release, you can save more money going with a previous version.
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Find The Right Vehicle For You
Once youve established how much you can spend on a used car, its time to find the right one for you, or at least a list of several candidates. There are hundreds of different vehicles out there, and the pool of contenders only grows when you consider models over a range of years. This may seem daunting, but the good news is that with such a variety, there is a vehicle thats right for you, whether its a small SUV, large pickup truck, midsize sedan or a sporty convertible .
If youre reading this, you already know that most of the browsing and research of your next vehicle can be done online. KBB.com has extensive and deep information on every major make and model of vehicle. From expert and unbiased reviews from our editors to finding the horsepower and length of the car , all the information you need is at your fingertips. Its also helpful to read consumer reviews of the vehicle you are interested in. Those can also be found here at Kelley Blue Book.
As with any vehicle purchase, consider not just your present needs but your future ones, too. If youre planning to grow your family, now is probably not the time for that 2-seat sports car. And if youre planning on a third child, wed recommend a 3-row SUV or minivan over a smaller 2-row SUV.
Benefits Of Buying A Used Car
Used cars offer buyers value and savings, which are attractive benefits to drivers who may not have a big budget, but still want to drive a quality vehicle.
Youll probably save money. No doubt about it, most used cars sell for significantly less than a new car with the same make and model. Case in point. The National Automobile Dealers Association notes the average American owns 13 vehicles over the course of their life, with each vehicle valued at $30,000, on average. If a buyer waited three years to buy the exact same vehicles, NADA stated, that buyer would save $130,000 by not paying for the cars when they were brand new.
Slower depreciation rate. New cars tend to lose value quickly, especially if theyre not properly cared for. But used cars tend to depreciate more slowly, especially if theyve had regular maintenance, and their sustained value makes them a good resale candidate if the owner wants another vehicle, but still wants to make a good deal when selling the vehicle.
A large down payment goes further with a used car. Buyers who can manage a robust down payment on a used vehicle can bypass a good chunk of the debt incurred in purchasing the vehicle. It comes down to simple mathif a buyer purchases a $20,000 used vehicle with a down payment of $10,000, theres only $10,000 left to pay on the vehicle. If a buyer purchases a new vehicle for $40,000, and puts $10,000 down, that buyer still owes $30,000 on the auto loan.
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Buying A Used Car: Act Fast
If you are ready to purchase, prequalified for financing and have spotted a used car that suits your needs, do not wait. Used cars stay on the lot for 34 days, on average, according to Cars.com, which is shorter than previous years. This is especially true for recent models in good condition with no wear and tear.
If owning a car is critical to your daily life, being patient is not a luxury you can afford. If anything, do your planning ahead of time so when the time comes, you have already done the legwork in terms of research and other preparatory steps. This will put you in a position to identify bargains faster and act quickly, which may save you thousands of dollars.
End Of The Car’s Life Cycle
Sometimes the manufacturer announces that it will stop making a car altogether. There’s potential in this situation for even bigger savings. You should know that the car will depreciate steeply if it’s being discontinued, but if you plan on keeping it for a while, it won’t affect you. It’s also worth looking into why the automaker pulled the plug on a given vehicle. Is it a matter of changing tastes, or was the car truly bad in terms of performance or reliability? In recent years, for example, SUVs have surged in popularity and many domestic automakers have discontinued many of their sedans. Going further back, vehicles such as the Nissan Murano CrossCabriolet never really found an audience and the Pontiac Aztek had a face only Walter White could love.
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Where To Buy: Dealers Or Direct
Most new and used car sales are still done through dealerships. Using a dealer lets you view and test drive multiple vehicles in a day, and provides access to financing and sometimes even useful services such as free oil changes or tire rotations. In many cases, a dealer will also accept a buyer’s old car on trade in with used vehicle prices so high, that can be a big help.
Problems with using dealers include their often aggressive sales tactics and tendency to fold extra services into vehicle sales at inflated prices. For instance, etching a vehicle identification number onto the windshield is a useful practice that can deter theft and lower insurance rates, but a dealer might charge more than $300 for the work, which consumers can do themselves with a $25 kit. To avoid paying excessive fees, it’s wise to ask about any dealer-installed options or markups, Montoya said. It’s a sellers market, and dealers might not waive any of the costs they tack on, but the buyer can always take their business elsewhere.
Of course, you don’t have to deal with dealers. Buying from a private seller is usually cheaper there’s less overhead to deal with and little chance for any inflated add-on costs. Buying privately can also be less of a hassle for consumers who don’t mind handling their own paperwork, arranging their own financing, and paying any applicable state sales tax when they register the vehicle.
Advantages Of Buying A Used Car
Pre-owned vehicles, to use the marketing jargon for used cars, may lack the mystique of new cars. But they have some advantages.
Lower prices. By the time a vehicle comes on the used-car market, much of its depreciation has already happened . So buying used is an opportunity to get more car for your money.
Warranties available. Some vehicles now come with warranties that cover the most expensive components of a cars drivetrain for 200,000 miles. If you buy a certified pre-owned car from a dealer, then youre likely to get a warranty that extends the manufacturers original warranty. Of course, if youre handy with a wrench, then buying a car that needs a little time and attention can dramatically reduce your cost.
Cheaper to insure. While a dealership may require you to have full insurance coverage for a new vehicle that youre financing, you may be able to spend less on insurance if youre paying cash for a used car.
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Get Financing Lined Up
Now that you have some vehicles in mind and your budget set, research your finance options. Most dealers offer financing, but we always recommend having an alternative as well. That can be a loan from your bank or credit union.
If the dealer can offer you a better deal, great. But getting pre-approved for a loan and your financing ready before setting foot in a dealership gives you more flexibility and wont make you beholden to just one sales lot or dealership. It also shows the seller that you are a serious buyer, not just window shopping.
When Is The Best Time To Buy A Car During Its Lifespan
When purchasing a used car, it’s important to take into consideration its age and its mileage. Also, it’s wise to know as much about the vehicle’s history as possible. On the surface, it may look perfect, but how do you know it hasn’t suffered any accidents or weather-related damage such as a flood? Did the car happen to come from or spend a significant amount of time in a region that experiences heavy winters? Chances are it will be more prone to rust on its undercarriage because of the salt used to deice the roads.
These days, it’s easy to know if a vehicle happens to have a sordid past thanks to vehicle history reports like Carfax.
Shift provides complete vehicle history reports on each of its vehicles at no additional charge, so you know all Shift cars come with a clean bill of health.
Also, whenever an automaker redesigns a car or discontinues a particular model altogether, the last editions to come beforehand usually bring an opportunity for significant savings. Keep an eye on car blogs and magazines to stay up to date on all new generations of specific models, which, depending on a car’s popularity, can happen every five years or so, and if any models happen to be on the chopping block, too.
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Buying Based On Looks
Before you even begin looking for a car, whether online or face-to-face, it’s important to assess exactly what you need from your car. If you’re looking for a commuter car, don’t waste your time looking at trucks. If you’re looking for a vehicle that can tow a trailer, don’t bother to look at sports cars.
Does The Car Have A Salvage Title
This could be a make or break question in your search for a used car. Salvage title vehicles are high risk and need to be carefully researched and considered. If the car has a salvage title, it means that the vehicle has been damaged in an incident and the cost of repairs would be more than the car is worth.
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Questions To Ask When Seeing The Car In Person
Once you have narrowed down your used car options and have the answers to the questions above, you are ready to view your cars of interest in person! Being able to see, sit in, and drive the car will make or break your decision to buy.
If a seller ever declines to let you test drive or view the maintenance and vehicle history of the car, you should take that as a big red flag and consider taking your business elsewhere!
What Is The Mileage On The Odometer
Asking about the mileage on the car can give you a great inclination of the overall wear-and-tear and depreciation and value of the vehicle. Say youre looking at a five-year-old crossover with 124,000 miles on its odometer. If your alarm bells arent ringing, they should be. Thats because the value of any used vehicle is based on how many miles are left on the car.
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Are You Able To Test Drive The Car
When youre communicating with the seller of a used car that youre interested in, asking them to test drive it is a crucial point in the decision-making process. You should never buy a used car that you have not been able to test drive and if the seller declines, you should write off that vehicle as an option.
Should You Buy A Used Electric Car Or New
There is no hard and fast answer when it comes to this question it is based on preferences and budget.
With used EVs, you can save money because the vehicle has experienced some depreciation since it was purchased, and you can get it right away.
With new EVs, there may have to wait for the car with your exact specifications to be delivered, but then you get the exact vehicle you want.
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Drawbacks Of Buying A New Car
Some disadvantages of a new car purchase might sway a buyers decision.
Immediate depreciation. The moment you drive a new car off the dealer lot, it loses several thousand dollars and an estimated 15% to 20% in the first year of ownership.
You may owe a lot of money on the vehicle. As car costs escalate, buyers who borrow 80% or more to purchase a new car, truck, or SUV may owe tens of thousands of dollars in auto loans before theyre free and clear. According to data from Lending Tree®, the average monthly payment for a new car loan stands at $563 in 2021.
Higher insurance costs. Auto insurers typically deem new cars as being more valuable than used cars and assign auto insurance premiums accordingly. According to Bankrate.com, the average cost of minimum auto insurance in 2021 is $565 per year. Since new cars cost more, auto insurers prefer to see new auto drivers get full coverage and not minimum coverage. The price for full coverage, Bankrate reports, stands at $1,674 annually.