Having trouble finding a new or used car at a decent price in 2021? You're not alone. COVID-19 disrupted almost every type of business, and the auto industry is no exception. We are seeing the ripple effects this year as multiple issues lead to inventory shortages and increasing prices. Read on to learn why car inventory is so low and where to look if you need to buy a vehicle this year.
Why Is Car Inventory So Low?
Feeling frustrated as you scour car lots and online inventories without any luck? It's not actually a scarcity of cars, but rather, the technology inside them.
"New car inventory is low because of the ongoing microchip shortage," said Zach Shefska, CEO and Co-Founder of Your Auto Advocate. "An estimated 5 million vehicles will not be produced for the US market this year because of the chip shortage."
While this can be great for those looking to sell their vehicles, it's leaving buyers at a disadvantage.
"The lack of new vehicles for sale has put pressure on used vehicle demand, increasing their prices," said Shefska. "Data from Black Book shows used vehicle prices have increased for 20 weeks straight. That's incredible because cars, trucks, and SUVs are typically depreciating assets, not appreciating ones."
Jake McKenzie, Content Manager at Auto Accessories Garage, echoes Shefska's message.
"While auto manufacturers may have temporarily reduced the number of vehicles their factories are producing due to added COVID-19 procedures, the bigger issue auto manufacturers are dealing with is a microchip shortage," said McKenzie. "Even with all other raw materials, you can’t build a modern car without a microchip."
Where to Look for New and Used Vehicles in 2021
If you are in the market for a new or used vehicle and can't wait, where should you look?
Shefska advises that you lease a car so you don't have negative equity in three years. However, if you're going to buy used, he offers some advice.
"Get a pre-purchase inspection so that you can make sure the vehicle is in good condition before buying it," said Shefska. "A lot of rough condition vehicles are making it to market as supply dwindles."
"As always, you can probably find better deals by searching for a used car sold directly from its previous owner," McKenzie adds. "However, the benefit to buying a used car through a dealership is they may offer a dealership guarantee."
That might mean scouring Craigslist and Facebook Marketplace for cars for sale by owner. Or, if you're going the dealership route,
If You Can Wait to Buy a Vehicle, You Probably Should
When it comes to vehicles, we are in a seller's market. Supply is down and prices are up. McKenzie explains that dealerships nationwide are expected to sell their entire vehicle stocks this year at higher markups than last year. We likely won't see the market stabilize until the microchip shortage ends, which may leave the industry reeling until 2023.
With this being the case, consider waiting to buy a vehicle if you can or lease a vehicle. If neither of those is an option, you may be able to save by buying a vehicle sold from its previous owner, but do your due diligence in ensuring it's in good shape. Further, if you do buy a used car from a dealer, don't forget the pre-purchase inspection.
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