Now that the world is opening again after the COVID pandemic a lot of people are interested in getting a new car.
But things have changed in the past year, so the question becomes how consumers can get the best deal in this brave new world. According to new report from Autotrader.com describing the current retail car sales situation, it’s plainly clear now is a “tough time” to be looking to buy a vehicle.
There are a couple of reasons. First, inventory is tight. Thanks to a worldwide computer chip shortage, automakers haven’t been able to build new cars to meet demand. This shortage has driven many consumers to the used-car side of the market.
And the availability of inventory on the used side isn’t much better than on the new. All of which presents problems for consumers.
What’s a buyer to do?
“There’s really no way around it right now, the laws of supply and demand are at play and shoppers should be prepared to pay more when buying a car – especially if it’s a popular type of vehicle like an SUV or truck,” said Brian Moody, executive editor for Autotrader.
“Much like the housing market, the new-vehicle market is extremely competitive, making the impacts of the vehicle inventory shortage that much more challenging. Heading into Memorial Day and the start of summer, we expect it will only get more competitive in the near-term.”
But, as the saying goes, to be forewarned is to be forearmed. Cox Automotive studies show consumers are aware of the computer chip shortage and its effect on new-vehicle production, and thus aware that they will face fewer choices on the showroom floor. Because they expect less, they will be satisfied with less.
People want their cars
Forty-two percent of in-market car shoppers say they expect to pay over sticker price for a new vehicle, and those willing to pay more than MSRP say they are prepared to accept up to a 12% premium.
Given the average price of a new vehicle is $41,950, that equates to paying about $5,000 above sticker. Yet more than 60% of potential buyers say they are not planning to delay their vehicle purchase, and the sales numbers are there to prove it. Even with low inventory and high prices, U.S. new-vehicle sales hit a new record in April.
In addition, limited inventory has prompted some consumers to shift toward shopping for used cars, which also have gotten more expensive. So many new-car intenders say they will shop for a used car instead.
Forewarned is forearmed
“To feel confident as they face these atypical market conditions, car shoppers need to be prepared and have realistic expectations,” said Moody. “Likely this will not be anything like the typical car-shopping experience that most people are used to.
“If you’re even able to find the exact vehicle you want to buy right now, you probably aren’t going to see major incentives or deals abounding at your local dealership. But doing a little research can go a long way to help you make the most of your car-shopping adventures during these difficult times.”
If you’re a used-car shopper, look at prices for both new and used versions of the vehicle you’re considering. If the new car is only a few thousand dollars more than the same make and model of a used car, it may actually be better to get the new car. The same is true for used cars versus Certified Pre-Owned (CPO), which usually are a little more expensive than standard used cars, but that price gap is lessening in the current market and CPO vehicles offer many worthwhile benefits.
If a consumer is set on getting a new car, consider getting a sedan. The demand for sedans isn’t as high as for trucks and SUVs, so there is a better chance of getting a more favorable price.
People leasing cars might want to buy their leased vehicles, especially if the lease term is nearing its end. Experts do not expect the current market conditions to change anytime soon, so buying out your lease may be a good option amid the inventory shortages.
Know what you’re buying when buying used
Carfax’s most recent research on the used-car market supports Autotrader’s position that used inventory is tight and prices are high.
So people in the used market have to be careful that they don’t put down a lot of money on a car that’s had a problematic history.
“We know vehicle history is critical when determining value,” said Joel Bassam, director of Marketing at Easterns Automotive Group. “The Carfax History-Based Value tool helps us determine value at a VIN-specific level.
“A vehicle’s history is critical to know and be confident in, it’s something we consider at every step of the vehicles journey, from auction to the customer driving home. Listing our vehicles on Carfax.com has been hugely successful for us, and we attribute that to the work we put in to consider a vehicles history before we purchase and recondition it.”