Car prices rise | Business


If you’ve recently bought a new or used car, you may have noticed once that overflowing parking lots are desolate landscapes of empty sidewalks.

Tight stocks and high demand are creating the perfect storm for high vehicle prices, said Justin Gearhart, general sales manager at Lawton Chrysler Jeep Dodge Ram.

There are several factors at play here, Gearhart said. The first is the shortage of microchips, which means cars cannot be completely built. Second, some auto factories were closed during the coronavirus pandemic, limiting the number of new vehicles that can be produced and third, the lack of parts such as the foam that goes into the seats.

Most modern cars use dozens of chips in everything from anti-lock braking systems and engines to stereos and tire pressure monitoring, according to Cars.com. Almost all electronic products also use these same microchips. With people staying at home during the pandemic, including automakers, factories have stopped or slowed construction of new cars as demand for items like computers, laptops and other electronics has skyrocketed. This need for home entertainment and schooling ripped out almost every available chip, leaving little room for new cars once manufacturing resumed.

Then came the historic Texas freeze that shut down production of petroleum products – the same material used in foam seat cushions, Gearhardt said.

All of this creates a supply and demand scenario where new and used car values ​​increase dramatically.

The choice has also become limited. Between the shortage of chips and parts, many dealers, including Lawton Chrysler, are left with a trickle of new inventory coming in while pushing their available inventory out of the showroom.

This has not only affected prices, but also, at least for now, the way consumers buy new cars. Gearhart said that before the pandemic, a buyer could go to the manufacturer’s website and “build” the exact vehicle they wanted. Buyers could add all the options, gadgets and gadgets available to make the vehicle unique. Now, due to parts shortages, buyers are limited to the options available and sometimes those manufacturer options change hourly.

What used to take just minutes inside the dealership can now take weeks when it comes to building the specific vehicle the consumer wants. Once these specifications are accepted by the manufacturer, there is no guarantee that the vehicle will arrive as requested.

Used car prices have reached all-time highs, in some cases exceeding the vehicle’s original MSRP, effectively turning vehicles into a valuable asset. This, on the whole, is not normal, Gearhart said.

“I’ve been doing this for a long time. I’ve been doing this for over 20 years and have never seen a market like this, where NADA, who is now JD Powers, adjusts the book value as much as it does.

According to the United States Bureau of Labor Statistics, used car prices jumped nearly 30% between May 2020 and May 2021, although part of that increase came from lower prices for cars from opportunity during the first two months of pandemic closure.

As demand for new cars increases, so does the price, Gearhart said.

The average listing price for a new vehicle was $ 39,833 in April, up 7.9% from 2019, according to Kelley Blue Book, a vehicle review website. Used vehicle prices hit an all-time high in May, averaging $ 22,568. At the same time, dealer and manufacturer incentives are down 25% from a year ago, according to Kelley Blue Book.

That’s not necessarily a bad thing for buyers looking to bargain, Gearhart said. While buyers may pay more for a new car, they will also get more for their trade-in.

“The bright side for buyers is that even though the prices are higher, your trade-in will never be worth more than it is today, and that may put you in a better position to buy a newer car,” Gearhart said. “And if you’ve recently bought a new car and want something new, now is a good time to sell and move on.”

As for when consumers can expect prices to return to normal, Gearhart isn’t bullish on what will happen soon.

“I don’t think it’s going to be just a few months,” Gearhart said. “I think it will take a lot longer and I think the initial drop, or the first big drop in prices will be significant, but I don’t think it will be detrimental. I think it will be gradual from there.


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