Nation’s driving desire stymied
U.S. buyers frustrated by supply chain woes and labor shortages
The car market is hot and if you’re not quick enough, or aren’t willing to let go of that dreamy sunroof you wanted, buying will be tough.
Inventory remains low and demand is high, so buying a new car, even if it is used, has become a lot harder for consumers.
Dana Bress, president of the New York Independent Automobile Dealers Association and a used-car dealer, said because prices are at historic highs, used vehicles are very attractive to buyers.
Data from Cox Automotive, which tracks the auto industry, listed the national average new vehicle price at the end of the first quarter this year at $44,360, compared to $39,545 at that same time in 2021 and $36,475 in 2019.
A variety of factors have limited supply including computer chip deficits, supply chain woes and labor shortages.
Used car prices are also sever
al thousand dollars higher, averaging $27,426 at the end of 2022’s first quarter. Those price points were valued at $21,334 in 2021 and $18,863 in 2019.
The higher prices come as new car inventory is down 54 percent from last year. Cox Automotive’s figures determined the supply of unsold new vehicles was 1.3 million less than those available a year ago, as of April. In contrast, there were 2.54 million unsold used cars on dealer lots at the beginning of April.
Cox’s Autotrader Executive Editor Brian Moody said stories of consumers paying $10,000 above sticker price for certain models aren’t unheard of these days. And those looking for high-demand vehicles including SUVS, should not only be prepared to pay more but wait longer, too.
“If you don’t already have an order in now, it might be months,” he said.
“If you’re low-income, or if you have poor credit, arguably, you’re the most price-sensitive shopper there is. The price is more important than the color and the brand, the reliability and all that, so that hits those people right in the most vulnerable place,” he said.
Even if such consumers forego desired features such as automatic stoplight shut-off or heated seats, the cost still will likely be more if their credit score is on the lower end of the spectrum.
Bress advised buyers who need financing to act now because she expects interest rates will rise again.
SEFCU President and CEO Michael Castellana said the more difficult part of the car-buying process is finding the vehicle you want in the time frame you desire.
“There is plenty of available financing certainly in the community banking and credit union space and so that is the easiest part,” he said, noting that there has been a lot more demand for auto loans.
In the first quarter of 2022, SEFCU closed on more than $110 million worth of auto loans, a 2.58 percent rise from this time last year.
Their average loan was $27,930. SEFCU’S average interest rate rose slightly to 2.39 percent from 2.16 percent.
Castellana said the most noteworthy change from 2021 is the length of loans. During the year’s first quarter, 51 percent of direct auto loans had 72-month terms, up 6 percent from 2021.
“As prices have increased, more borrowers are taking out longer-term loans to keep their monthly payments affordable,” he said.
Some industry executives believe the global computer chip shortage will last into 2024 or longer and continue having a residual effect on the automotive sector.
Microchip producers say the problem will persist into 2023 and 2024, or longer. Globalfoundries executive Tom Caulfield told the Wall Street Journal that people hope the dilemma will be over by the end of this year, but he doesn’t see that happening.
Bress agreed.
“I think over the next few years, it will settle a little and if you’re holding the car for a few years, I think you’ll be OK in the end. I don’t think we’re going to see this for a long term,” she said.
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If you don’t already have an order in now, it might be months.”
Cox’s Autotrader Executive Editor Brian Moody