Tips for car buyers amidst the nationwide shortage

Mostly used cars and empty spaces fill what used to be a lot of new cars in Utah County. (Mike Stapley)

Estimated reading time: 6-7 minutes

SALT LAKE CITY – Car dealerships experienced declining demand as people worked and drove less during the COVID-19 pandemic. As a result, car manufacturers cut production. As the demand for new and used cars increased dramatically, suppliers and manufacturers were caught off guard.

Combined with the general supply chain shortage across all sectors, vehicles have become scarce.

Most of the blame for the new car shortage is a poor supply of semiconductor chips. And while President Joe Biden has invested hundreds of billions of taxpayer dollars to pump the industry into the United States, most of the raw materials and most of the chips themselves come from overseas.

The chips are used in countless technology products, including modern cars, televisions and computers that have seen increased demand as demand for cars was diminishing at the start of the pandemic.

Modern cars are as electronic as they are mechanical, as an internal computer manages almost everything, and those chips control even the simplest functions. A typical car built today can require dozens of chips, a luxury or high-performance car up to 150, and a modern luxury or high-performance electric vehicle can use up to 3,000 chips.

One of the most anticipated new car launches in some time – the return of the Ford Bronco – has been hampered by a shortage of chips. Ford had built and parked thousands of Broncos until the chips could be obtained, at which time Ford would have to ship those vehicles to the factory for final assembly and then deliver them to dealers. Photos taken last year show the thousands of highly sought-after cars standing still. Lately, Ford and other automakers have been negotiating to have dealers install the chips after delivery, once they are available, in order to free up space in factories and shipping lots.

Ford and Tesla, among others, have also shipped cars with some non-essential functions, such as automatic start / stop, adaptive cruise control or rain sensing wipers, not yet working. Consumers will then return to the retailer when the chips are available or receive discounts upfront for features not provided.

Another hurdle is that increased demand for used cars also drives prices up, and dealers aren’t negotiating on the few new cars available. Some new cars are even seeing dealer mark-ups, according to industry leaders, beyond the price of the sticker, in some cities.

While car dealerships are starting to see new cars in their lots for the first time in months, it will be a while before things get back to normal.

I personally experienced the new car buying experience earlier this summer and have some suggestions for potential buyers.

Expand your search. Online sales sites, such as Autotrader and CarGurus, allow shoppers to find cars near and far as they browse used and new car stocks. Car dealerships are more equipped than ever these days to do business online or by email and phone.

While dealers are now unlikely to be willing to trade cars with other dealers, or even have exchanges to offer, being willing to travel to get a car means a greater chance of finding what you want. Some markets also have cheaper used cars available, because they have larger stockpiles than others.

I ended up selling my previous car locally and buying a new one two states away.

Wait to buy if possible. No used car currently on the market is worth what you will have to pay for it. There’s no business to be done on new cars, period. The supply shortage will end and when that happens, not only will dealerships be inundated with new cars, but they will have surpluses of the used cars they have accumulated to sell in the absence of new cars.

Timely shoppers will find great deals across the board, as dealerships need to free up used inventory to make way for new cars and may be bargaining heavily on new cars as used car prices drop.

A large Utah County Ford dealership I spoke to this week typically has about 700 new cars and 40 to 50 used cars on its lot. Currently, however, they have 150 used cars and around 40 new ones, which gives a perspective on the current market. The new ones are almost all of the same truck model.

Be flexible. Market price changes can be dramatic, and the new car you want may simply not exist.

The new car you found several states away may be from a dealer who has no interest in your trade-in, as they have too many used cars on hand. Try other dealerships in that market you will go to or sell your car to locally and use some of your current used car earnings to book a flight to pick up your new car.

In my case, I found new cars that interested me in several states, none in mine, of course, and bids for my previous car ranged over $ 10,000. I sold my car to a local dealership for far more than it was worth, and part of the proceeds funded a flight and a fun trip home for my wife and I in my new car.

Do your homework. It will take more effort than expected to buy a car now, and some time invested can mean thousands of dollars when selling a used car to make way for a new one. Traditionally, selling a car privately meant a higher return than trading a car at the dealership. With dealers now desperate for cars to sell, they are reportedly paying off.

Private buyers may not understand the current market and may not pay for what resellers offer. Retailers are making it easy to get ratings online or by email. I sold mine to a retailer by email, with some photos and my VIN number.

Check out the option packs of the new car you are looking for, it makes online shopping easier as the wheels in a photo or the price tell you right away if it’s a contender. Knowing what is included in each price range can help you drive to a car you may have overlooked while shopping in person.

Know your options at the end of the lease. A rented car can be sold or exchanged, like any other car, before the lease expires. Anyone with a lease expiring in the coming months should immediately compare the purchase amount to the car’s current market value.

Each lease, through a manufacturer or lender, contains a predetermined purchase amount for the vehicle at the end of the lease. Normally, lenders do a great job of ensuring that the value matches future market conditions and depreciation. The current situation makes all these predictions meaningless.

In my case, the value of my rental car exceeded the acquisition, in the amount of $ 2,000- $ 12,000 in equity, depending on where I sold it. I lowered the equity – which would have vanished if I had turned over my car at the end of the lease four months later – on the new car I bought. It is possible, even in this crazy market, to come out very far.

The current situation is definitely not a buying market for vehicles.

Not everyone, however, will find themselves in a situation where they can wait for a new or used car. With a little homework and perhaps a willingness to travel, it is still possible to get a deal on a car during the upcoming holiday season to purchase cars.

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