Transportation: Auto prices race upward
“This is a historically terrible time to buy a car,” said Jordan Weissmann in Slate.com. Forget buying new: Many models are in such short supply that dealerships are “practically barren of inventory.” That has helped push the average price of a pre-owned vehicle up a record-breaking 10.5 percent in June to nearly $25,000. The reason can be traced back to the start of the pandemic, “when car manufacturers shut down their factories and canceled orders from suppliers, including chipmakers.” Upon restarting their assembly lines, the automakers discovered “there were no longer enough chips to go around.” The chip shortage has idled plants and hampered production of new vehicles. With used-car lots now also starting to get depleted, prices have soared. Unfortunately, automakers can’t dig out of this hole overnight. It typically takes “nine months from the time a car company tells its suppliers it will need parts to when they arrive,” and the auto industry didn’t confront its chip shortage until this winter. There’s also “a limit to how fast assembly lines can run.”
Some owners are actually selling their used cars for a profit, said Nora Naughton in The Wall Street Journal. The old adage that a car starts depreciating in value as soon as it rolls off the lot is being upended. Some particularly popular SUV and truck models, such as the Kia Telluride and the GMC Sierra, are selling for $3,000 more used than new because they are so hard to get. Even “the average selling price of a car with between 100,000 to 110,000 miles was $16,489 in June,” up nearly $4,000 from a year ago. Just don’t plan to shop around your lease, said Andrew Ganz in MarketWatch.com. Several automakers, including Honda, General Motors, and Ford, are requiring leased vehicles to be turned in at their dealerships, closing a loophole that allowed lessees to “take advantage of a higher buyout offer from a competing brand’s dealer or even a carbuying service such as Carvana.”
In urban centers, ownership is making an unexpected comeback, said Emily Cadman in Bloomberg.com. Before the pandemic, “obituaries were being written for the automobile” because Millennials and Gen Zers were more inclined to live in cities and opt for public transportation or share an Uber. “But these calculations changed during the pandemic,” and attitudes about car ownership seem to be changing again. “If the trend of remote work persists,” more people are likely to stick with having their own transportation. Even if trains, buses, and ride-hailing rebound, young drivers have gotten a taste of “the sense of convenience and freedom” of car ownership for trips out of town or even life in the suburbs.