Tips for car buyers amid nationwide shortages

Most of the used cars and vacant spaces fill what was normally an entire new car lot in Utah County. (Mike Stapley)

Estimated reading time: 6-7 minutes

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

Combined with general supply chain shortages across industries, vehicles have become scarce.

The main culprit for the shortage of new cars is a tight supply of semiconductor chips. And while President Joe Biden has poured hundreds of billions of taxpayer dollars into boosting the industry in the United States, most of the raw materials and most of the chips come from abroad.

The chips are used in myriad tech products, including modern cars and televisions and computers that saw increased demand as demand for cars dwindled at the start of the pandemic.

Modern cars are both electronic and mechanical, since almost everything is run by an internal computer, and those chips control even the simplest functions. A typical car built today may require dozens of chips, a luxury or performance car up to 150, and a modern luxury or performance electric vehicle may use up to 3,000 chips.

One of the most anticipated new car launches in quite 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 that point Ford would have to ship those vehicles back to the factory for final assembly and then deliver them to dealers. Photos taken last year shows the thousands of highly wanted cars that are sitting idle. Lately, Ford and other automakers are negotiating to have dealers install the chips after delivery, once they’re available, to free up space in factories and shipping lots.

Ford and Tesla, among others, have also been shipping cars with some non-essential features, like auto start/stop, adaptive cruise control or rain-sensing windshield wipers, that still don’t work. Consumers would then return to the dealer when chips become available, or take discounts up front for features that weren’t delivered.

Another hurdle is that rising demand for used cars is also causing prices to skyrocket, and dealers aren’t trading in the few new cars available. According to industry leaders, some new cars are even seeing price increases from dealers, beyond sticker price, in some cities.

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

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

Broaden your search. Online sales sites, such as auto trader Y CarGurus, allows shoppers to find cars near and far while browsing new and used car inventories. Car dealers are better equipped than ever these days to do business online or by email and phone.

While dealerships are now unlikely to be willing to trade cars with other dealers, or even have trade-ins 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 inventories built up than others.

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

Wait to buy, if possible. No used car on the market today is worth what you will have to pay for it. No deals on new cars, period. The supply shortage will eventually end and when that happens not only will dealerships be inundated with new cars, they will have surpluses of the used cars they have been stockpiling to sell in the absence of new cars.

Buyers who get it right at the right time will find great deals across the board, as dealers need to liquidate used inventory to make way for new cars and may be trading heavily on new cars as car prices fall. used cars.

A large Utah County Ford dealer I spoke with 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 some perspective on the current market. The new ones are almost all of the same truck model.

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

That new car you found several states away may be at a dealership that has no interest in your trade-in as they have too many used cars available. Try other dealers in that market you’ll be traveling to or sell your car locally and use some of your current used car windfall 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 the offers on my old car varied by more than $10,000. I sold my car to a local dealer for way more than it would have been worth, and part of the proceeds financed a flight and fun road 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 a little time spent can mean thousands of dollars when selling a used car to make way for a new one. Traditionally, selling a car privately meant higher returns than trading in a car at the dealership. Now that dealers are desperate to sell cars, it seems they are paying.

Private buyers may not understand the current market and may not pay what dealers offer. Dealers are making it easier to get valuations online or by email. I sold mine to a dealer via email, with some photos and my VIN number.

Learn about the option packages on the new car you’re looking for, makes shopping online easier as wheels in a photo or price tell you right away if it’s a competitor. Knowing what’s included at each price point can help you find a car you may have overlooked while shopping in person.

Learn about your options at the end of the lease. A leased car can be sold or traded, just like any other car, before the lease ends. Anyone with a lease ending in the next few months should immediately compare the full purchase amount to the current market value of the car.

Every lease, whether through a manufacturer or lender, contains a predetermined purchase amount for the vehicle at the end of the lease. Lenders typically do a very good job of ensuring that the value matches future market conditions and depreciation. The current situation makes all those predictions meaningless.

In my case, the value of my rental car exceeded the value of the purchase, to the tune of $2,000-$12,000 in principal, depending on where I sold it. I put the equity (which would have evaporated if I had delivered my car at the end of the lease four months later) into the new car I bought. It is possible, even in this crazy market, to get ahead.

The current situation is definitely not a buyer’s market when it comes to vehicles.

However, not everyone will be in a situation where they can wait for a new or used car. With a little preparation, and perhaps a willingness to travel, it’s still possible to get a deal on a car this coming car buying season.

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