Car Shortage Continues Features Higher Prices And Empty Lots
WILMINGTON, N.C. – Rob Curtis works at Auto Wholesale in Wilmington and is baffled by the current car shortage.
Ive been in this business since about 1990 and Ive never seen anything like it, said Curtis.
Auto dealer lots are looking a bit bare and its mainly due to a nationwide computer chip shortage. But, its also a supply and demand issue.
As to the economy, the changes and the inflation weve seen lately, its quite a difficult journey, said Tony Brannock, the owner of Seaport Auto Sales.
Prices for used cars are shocking buyers.
Cars that are usually about $5,000 to $6,000 dollars have been about $8,000 to $10,000, said Samantha Kittrell, who is searching for cars.
Its even impacting dealerships with new cars, putting the brakes on customers looking for a new ride.
We do try to locate cars at other dealers if that is an option and quite frankly people are having to settle now you know, they might not be able to get the exact car they want, said Andy Craven, general manager of D& E Mitsubishi. It might be missing one option or not the exact color they want.
However, professionals in the industry are hopeful theyll be able to get back into gear with lots filling up to normal levels in the coming weeks.
Were just hoping itll free up soon, it looks like in the next month or two actually everything is starting to plateau some, said Rob Curtis, sales manager of Auto Wholesale.
So, if youre looking for your next sweet ride, you might have to wait.
Low New And Used Vehicle Inventories What Are Your Options
Currently in the new vehicle market, the highest demand is for SUVs and trucks. Enders said that in both the new and used vehicle markets, that demand is rapidly shifting from the large gas-guzzlers to the smaller versions.
Enders sys that in the past 3 months, potential buyers are asking a new question: Whats the gas mileage on this vehicle?
We are seeing a high demand for Subaru and also SUVs with four cylinders, he said. People are very mileage conscious, and nobody was asking me about that a year ago.
Forget about negotiating down from the sticker price. With low inventory, you have little bargaining power. The MSRP is the price.
Enders said that industry standby guidelines such as Kelly Blue Book and NADA should be treated as just that guidelines.
They are a guide, he said. Prices are higher than published.
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How Long The Car Lots Will Remain Empty
The lowest number of car sales in the past decade because of a chip shortage in the car industry. Thats why we see so many car lots are empty in the world.
The chip manufacturers have been unable to produce chips for the car industry nowadays.
There are no signs that the chip shortage will be ending soon, so you can expect these sky-high car prices to continue!
What will happen if another supply shortage hits us? It could be an unprecedented situation that could cause an unending chain of events.
The lack of microchips disrupts car production for one company or brand and many other companies that must wait until their own supplies impact has cleared up.
A microchip shortage layered on another supply shock before the industry could get back on its feet and replace diminishing inventory.
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Instant Gratification Meets Market Realities
Since the earliest days of the auto industry, buyers have been able to order a vehicle in advance. Indeed, thats the norm in Europe and many other parts of the world. But U.S. shoppers traditionally have wanted instant gratification and expected to drive into a dealership with their old jalopy and then drive home with a new model the same day, said Dave Gardner, the executive vice president of U.S. operations for Honda.
Ongoing inventory shortages have been a major factor behind the shift, but there are other good reasons why more Americans are now willing to preorder. Automakers have made the process a lot easier than ever, with new websites that simplify choosing the precise model, color, features, and options you like.
The Cars.com survey also found that 38% of current car shoppers expect to complete the entire car-buying process online, with another 38% intending to do all the paperwork online but purchase their vehicle in person. In many cases, that only involves putting a wet signature on the final sales documents where required by state and local laws.
Auto Production Wild Card For 2022 As Dealer Lots Remain Sparse
Production delays due to the global semiconductor shortage and supply chain issues have left dealer … lots nearly empty.
Cars and trucks are trickling off assembly lines a little faster as automakers find workarounds to solve the semiconductor shortage, but dealer lots are likely to continue to suffer from empty nest syndrome for several more months according to a number of industry reports.
Throw in the likelihood that auto load interest rates will rise and it adds up to no relief for shoppers looking for ample choices, or most any new vehicle, at affordable prices. Indeed, if a driver’s ride is still serviceable, it may make sense to sit out 2022 and wait for inventories to rebound and prices to retreat back from out of reach for many to merely expensive.
Frustrating for automakers and dealers is the reality there are simply not enough cars and trucks available to meet very strong demand. In 2021 new vehicle sales were just under 15 million units. That’s about 2 million less than 2019 ahead of the onset of the Covid-19 pandemic.
It’s not for lack of interest by consumers.
Kevin Roberts, Director of Industry Insights and Analytics at auto marketing website CarGurus.com
According to the National Auto Dealers Association inventory levels at the end of December 2021 totaled 1.12 million units, up 7.4% compared to the end November 2021, but down 59.1% compared the end of December 2020s total of 2.75 million units
Ed GarstenEd Garsten
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Auto Chip Shortage Has New Car Lots Empty Boom For Used Car Dealers
A shortage on auto chips or silicone microchips necessary for the production of new automobiles has left many dealer lots empty nationwide.
Conversely, that auto chip shortage has led to a boom for used car businesses.
Small Business Trends contacted one local used car business to find out how theyre dealing with the current situation.
Were finding that people are looking for later model used cars with low mileage, says Jerry Enders, a used vehicle business owner in Pennsylvania for more than 40 years.
Prices have been running 20 to 30 percent higher, he says. The prices are out of line because of the chip shortage.
Car Lots Are Vacant Due To Supply Crises
The empty car lots are because the dealerships arent getting enough vehicles from the car manufacturers.
Due to production issues, the dealerships dont deliver cars on time. Still, production isnt progressing at the same frequency of orders received.
Nowadays, the car industry has been upended.
New factors have changed the automotive landscape to make it hard for consumers to know where to start when looking for a new car purchase or lease.
There is a shortage of semiconductors , and car manufacturers cant produce enough vehicles to meet consumer demand.
As a result of consistent demand for new vehicles, car dealers are experiencing markedly low inventories.
Many people consider purchasing pre-owned vehicles due to low supply and empty car lots.
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Creativity To Reach And Keep Customers
There will also be more pre-sales. Dealers are already doing that selling the vehicles before they get them and some might never touch the lot, because theyre already sold by the time the vehicle is delivered.
We saw a lot of creativity when pandemic restrictions first hit, such as showing and selling without in-person contact.
Now its about issues such as customers returning leases without another to get into.
Were also seeing customers buying vehicles even if theyre missing features that the automakers had to leave off because their chips arent available.
In a way, its a perfect storm because if we were in a normal recession, people wouldnt be looking for cars on the scale they are now.
Globally, car sales and production are down, but when the tide finally turns, its going to get much better.
Rebekah Young is the Director of Fiscal & Provincial Economics at Scotiabank. With prior experience working with the IMF, and as a former senior official at the Department of Finance in Ottawa, she has addressed a range of topics, from development economics to the federal budget, to green finance issues.
Higher Prices For New Cars
All told, automakers worldwide produced about 8 million fewer vehicles than planned last year because of product shortages. Even if production rebounds, dealers won’t be able to build back inventories until well into 2022, J.D. Power analyst Tyson Jominy said. As a result, buyers should expect limited choices while prices will continue to rise at a record rate. At the end of 2021, a typical new vehicle cost $45,000, up about $8,000 from December 2020, according to industry data.
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These New Cars Are Nearly Impossible To Find On Dealer Lots
Blame a global computer chip shortage that has crippled car production, pent-up demand caused by coronavirus pandemic restrictions, or simply a bustling economy. No matter the cause, one thing is for sure: new cars are in short supply.
Cox Automotive found that some models are nearly nonexistent on dealer lots. A standard metric used in the automotive industry looks at the theoretical number of days it would take for dealers to run out of a specific model entirely, assuming supply was cut off.
Toyota dealers have the weakest inventories: just 18 days supply on average, meaning lots would be essentially empty in less than three weeks if the automaker stopped shipping new cars from its factories.
The hottest Toyota is, ironically, one of the oldest designs on the market. The 4Runner SUV is down to just 9 days supply. Many of Toyotas biggest dealers dont even have a single 4Runner in stock, while some dealers are asking over list price on the off-road-oriented SUV.
Another model thats tricky to find is the Chrysler Pacifica minivan, which has less than 20 days supply.
General Motors large SUVs, including the Chevy Suburban and Tahoe, GMC Yukon, and Cadillac Escalade are tricky to find, too. Dealers have less than 25 days supply on average for the big SUVs, which can cost as much as $100,000.
Startups Will Continue To Shake Things Up
The automotive industry was a largely closed club since World War II, but Tesla showed its possible to crack the code. Now, other start-ups want to share in its success. Wall Street has rewarded several of the most promising players. Rivian now has a market cap of over $90 billion, more than either Ford or General Motors. But others, like Byton, Lordstown Motors and Faraday Future are struggling and could fall aside in 2022.
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Meeting Demand Without Overcapacity
As well, the automakers are going to be careful about how they meet that demand, even if they have more than enough chips in their stockpiles.
They have to keep up so they dont lose market share, but they also know this situation is transitory.
They dont want to bring in extra capacity, because once the backlog is settled, theyll be stuck. Instead, we expect theyll try to maximize the efficiency of their current capacity.
Even so, many vehicles will likely be sold even before they arrive at the dealerships, so well still see empty lots for some time.
This vehicle demand is a good-news story tinged with uncertainty, and its not only going to require patience but likely some operational changes for dealers.
The strategy is going to focus on profit rather than volume for at least the next two years.
The demand will be there, and dealers wont have to resort to fire-sale prices to get vehicles off the lots.
Chip Shortage Impact On Business Vehicles
If your business has some low-mileage leased vehicles, or youre driving a low-mileage late model vehicle, youre in the drivers seat.
New vehicle dealers are struggling to meet demand, while its a sellers market for used vehicle dealers. Comparable to the real estate boom, prices are higher than book value. In fact, the current price of a used vehicle is at least 10-30% higher than its actual value.
Is it the perfect time to trade in your fleet? Or your personal car?
Before you do that, youll have to ask yourself an important question, considering the current state of the vehicle market: How are you going to replace those vehicles?
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What Should The Automobile Industry Do
Over the past month, the inventory of cars at dealerships has been going down.
However, we dont know yet if this is a permanent change or temporary until car manufacturers start producing more vehicles.
There are so many dealerships that it is hard to get any new customers.
The automotive industry has been coming back in phases since the collapse of the auto supply chain.
The aftereffects of the pandemic have caused problems for motor vehicles worldwide.
Although producers have secured some semiconductor chips, an acute shortage affects their production and distribution.
With parking lots being scarce and consumers no longer having access to many models.
As demand increases, purchasing options also reduce, with factories still experiencing hiccups during production.
Just Pay Up If You Can Afford To
Of course, if you’re willing to pay significantly more than a car would typically cost, car shopping right now can be pretty easy.
“We are marking some of our vehicles up $5,000 over MSRP,” Chismar, the Toyota salesperson, says, referring to the manufacturer’s suggested retail price. “That’s a hard pill to swallow. And people are doing it. It shocks me all the time.”
“Pay more” is not exactly a top-secret pro shopping tip, we know.
But some shoppers are flush with cash, thanks to foregone vacations, saved relief checks or a surprisingly valuable trade-in.
Others are just at the end of their rope or as one exasperated shopper told NPR, “I was willing to spend the extra money because I was tired of shopping for cars.”
Two unsold 2021 Subaru SUVs sit in an otherwise empty storage lot at a Subaru dealership in Littleton, Colo., on Sept. 12. Ordering a car directly from an automaker can mean long waits, but doing so can be easier than finding a car you want at a dealer. David Zalubowski/APhide caption
Two unsold 2021 Subaru SUVs sit in an otherwise empty storage lot at a Subaru dealership in Littleton, Colo., on Sept. 12. Ordering a car directly from an automaker can mean long waits, but doing so can be easier than finding a car you want at a dealer.
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Ford’s New Bronco Raptor Is A Street
It’s getting easier to shop for a new car again now that dealerships across the United States are starting to open up following the coronavirus lockdowns. But don’t go shopping with your heart set on anything specific. It’s going to be harder to find the exact car, truck or SUV of your dreams.
When Will The Car Shortage End
The end of the car shortage is largely dependent on the semiconductor chip shortage, which means we may be facing this problem for quite a while, with everything from new and used cars to video gaming systems . Intel CEO Patrick Gelsinger announced that the semiconductor chip supply likely wont meet its demand for about another two years, so supply chains will remain impacted.
Auto industry expert Sam Abuelsamid explained to Consumer Reports, Its likely that car buyers will be paying more for new vehicles, at least through the next year and perhaps longer. Most automakers are facing production cuts, which in turn means a limited inventory of new products on dealer lots. Low inventory means reduced or nonexistent discounts and deals on new vehicles. Still, even though vehicles will be pricier, he warns, now isnt the time to sit idly by if you really need a new vehiclejust make sure to do a lot of research and be open to different options.
There is very little on dealer lots to actually sell, he said. If you anticipate needing a new car in the next six months, its probably best not to wait. Go ahead and place a factory order now.
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New Car Lots Empty As Vehicle Shortage Hits Locally
- Alan Van Zandt
Those in the market for a new automobile are having a tough time finding new cars. Supply at area new car dealers is at an all-time low.
“Right now if we’re looking new, I’ve got three Kias sitting on the lot up here,” said Matt Stephenson, general manager at Anderson Ford-Kia. He added that he’s got about a dozen new Fords, but that was about it for new vehicles.
“It’s never been this low. We’re probably at five percent of what we’d normally be at this time of year,” he said.
The supply chain problem with autos can be traced to a shortage of microchips.
“A modern car is essentially a computer,” said Sean Tucker, an auto industry analyst for Kelley Blue Book. “Many of these cars have 100 to 150 microchips in them. They control everything in them from the temperature to the timing of the engine.”
Auto manufacturers slowed down their production of new cars at the start of the pandemic. Fewer people were in the market for new vehicles at the time. Because of that, car makers cut down on their orders for new microchips. But now that people are back out and about driving again and needing new cars, the overseas makers of the microchips can’t keep up with the demand.
So for those looking to purchase a car right now, maybe going “used” is an option.
“If you’re going to buy a car, you’re going to pay a lot compared to what you would have a couple years ago. If anything, I’ve lowered my margins a little to try and soften the blow a little bit,” Valdez said.