High prices, low inventory new norm for buyers
Shopping for a new or used car over the past couple of years has become a more challenging endeavor. Because of the COVID-19 pandemic and its after-effects, we’ve had to deal with factory closures, supply chain issues, a worldwide shortage of semiconductor chips, vehicle shortages, price hikes on dealer lots and fewer discounts. Throw in sky-high fuel prices and rising interest rates, and it’s enough to make people throw their hands up in resignation.
With this in mind, here are a few issues you need to know about the current car-buying climate, plus tips on best managing them.
Many people who were on the fence about buying a new car likely decided to wait out the chip shortage. In a recent interview, however, Intel’s CEO, Pat Gelsinger, was quoted as saying he expects the chip shortages to persist until 2024.
The good old days of steep discounts or bonus cash from manufacturers are long gone. You’re far more likely to run into vehicles with markups or “market adjustments” than one with a discount. We’ve seen markups as low as $1,000 and upward of $50,000 for high-end luxury vehicles.
“While inventory numbers will eventually normalize, consumers should probably get used to the idea of ordering their vehicle rather than be presented with a surplus of choices at a dealer’s lot,” said Jessica Caldwell, Edmunds’ executive director of insights.
Edmunds data shows that the average annual percentage rate, or APR, for new financed vehicles in April was 4.7%. Used cars tend to have higher rates, and in April, the average used car loan APR was 8%. This isn’t much higher than a year ago, but the Fed has indicated that it plans to increase rates a few more times in 2022.