Auto Industry, Auto Sales, Auto Prices, Used Car Shortage
By Rebekah Bradley
I hear regularly, "What's up with used car prices?" Followed quickly by, "This has got to end soon, right?" It may seem like a simple problem, no computer chips for new vehicles, with a simple answer, make more! Unfortunately, it is not that simple and the fall out from what we are seeing right now could take a few years to sort itself out. Here is why ...
New cars have typically been produced on a regular schedule. Dealerships and manufacturers knew what inventory was needed and when based on past numbers. This allowed them to satisfy demand and maintain a steady supply. When production was halted last year, this disrupted the supply chain in multiple ways. Dealerships were no longer receiving their regular deliveries of new cars and chip manufacturers shifted their focus to fulfilling orders for those in other industries. When things began to open back up and vehicles were in demand it was quickly discovered that getting back to business as usual was going to be difficult. First chip manufacturers are mostly outside the United States and many factories have shut down and some are still shut down. Chips for new vehicles are not available for the vehicles being built. This is causing a shutdown of manufacturing plants across the U.S. for new vehicles because there is no place to store them while they wait on chips. Even when these plants are open many are at reduced capacity due to Covid restrictions. With new vehicle supply not meeting the demand, used vehicles are filling the gap. For probably the first time in history used vehicles are appreciating! ln talking with dealers and GMs throughout the nation this shortage of new vehicles is expected to last another 6-12 months, and even then, it will take additional time for the market to recover. This price increase is hitting dealers and consumers alike. Unfortunately, there are only so many used vehicles out there and the number decreases by the day due to accidents and other incidents that damage vehicles beyond repair. This is a situation that manufacturers and dealers are working hard to resolve, but it will take time.
In the meantime, if you are in the market for a vehicle look for a dealer that you can trust. Ask for recommendations from friends or family and do your research. A used vehicle is just that used, but you want to know that the car you are getting is mechanically sound and that it has a clean title. It is important to understand the pricing of the vehicle you are looking at. You may be looking at two very similar vehicles with different prices, know why they are different. One may have been fully reconditioned, while the other may not. Knowing that you won't have large maintenance costs soon may be worth the extra money be asked. Understand that on line valuation tools such as KBB and Carfax are good tools to help you educate yourself about a potential vehicle, but they should only be seen as resources. There are many things that they don't consider that can affect the vehicle's value both for the positive or negative. Ask a dealer for a NMVTIS report. This is vehicle history report that insurance companies, auctions, and DMVs across the country report to. This will be the most accurate report about the title status and history of the vehicle. (It doesn't show maintenance history.)
On the plus side if you have an extra vehicle this is a great time to sell it. If you don't want to meet with people, consider consignment with a reputable dealer. It is a simple process and will make you the same or more as if you sold it yourself. (Written October 2021- Parish Neighbors of Cedar Mill Magazine)