What cars are hard to find right now?
What cars are hard to find right now?
As the Federal Reserve considers raising interest rates Wednesday, the auto industry is keeping a close eye. For many Americans, owning a car is a necessity, but with high price tags fueled by strong demand and rising interest rates, it has become difficult for many to afford one. Although prices have dipped slightly from historic levels, the average price of a new car is still close to $50,000. Used cars cost about $28,000 on average. Additionally, high annual percentage rates, which can be as much as 11%, are helping make monthly payments skyrocket.
According to the car shopping website Edmunds, the average monthly payment for a new vehicle is $731. For a used one, it’s $551. This marks an increase of up to 32% from pre-pandemic levels. Adam Lee, the owner of 16 car dealerships in Maine, said the average price of a car at his dealerships is about $50,000. He said business has been especially good the past three years, but senses a change.
«We’re still seeing very strong demand, but . you can feel it — that it’s slowing down,» Lee said. One in six people who recently financed a new car committed to monthly payments of $1,000 or more, which is the highest on record, according to Edmunds. Lee said that if interest rates keep increasing, it could result in a lockup of the industry. «Most dealers borrow money to pay for their cars. And at some point, that will start to have an impact. If rates keep going up and people can’t buy cars, it means we won’t order more cars,» he said.
While inventory has improved recently, production of new vehicles has favored higher-priced models with lots of amenities. Demetrius Thrasher, who depends on his vehicle for food deliveries outside Atlanta, had to purchase a new car for about $25,000 more than he initially planned. His previous car was totaled in a crash last summer, and he found out that his options for a new car were limited. «I called around to the other dealerships and throughout the state of Georgia, and they were like, ‘We got nothing,'» Thrasher said. He now pays around $1,000 per month for his car and has had to defer payments twice. This is becoming more common. According to data from Cox Automotive, delinquencies for auto loans that are 60 days or more past due have increased by 20.4% compared to last year. According to Jessica Caldwell, who analyzes auto transactions for Edmunds, consumers are facing a «double whammy» as both car prices and interest rates are high. But she said automakers are offering incentives for shoppers, which could help those struggling to find an affordable option. Caldwell suggests looking for auto loans that offer favorable interest rates and terms, and also keeping in mind the trade-in value of a car in the long run.
«If you do go to trade in your vehicle and you overpaid, chances are you could be in a situation where there’s a big difference between what your vehicle is worth and how much you have to pay off on your loan. And that’s where it becomes scary,» she said.
Zelenskyy vows on VE Day to defeat Putin «just as Nazism was defeated»
South Carolina doctors give young Ukraine war refugee the gift of sound
Man known at work for «strong ethics» charged with ex-girlfriend’s murder
King’s ex-classmate says young Charles was bullied as an «outsider»
Nancy Chen is a CBS News correspondent, reporting across all broadcasts and platforms.
First published on March 22, 2023 / 8:28 AM
© 2023 CBS Interactive Inc. All Rights Reserved.
Car Inventory Shortage Updates
COVID-19 is among the top reasons why there is a car supply disruption. However, more than two years into the pandemic, we’re still in this predicament. The shortage has resulted in record prices for new and used vehicles (although used vehicle prices are starting to come down).
Why is there an Inventory Shortage of New Vehicles?
The market is currently experiencing a shortage of semiconductor chips. This has prompted car manufacturers to slow their production or even temporarily pause it in the last 2 years. At the beginning of the pandemic, car manufacturers erroneously anticipated that consumer demand for cars would significantly decline. As a result, they radically reduced orders for semiconductor chips which are needed in every car these days. When car makers realized that demand for new cars had not declined but rather increased, it was too little too late. All of a sudden, car makers were at the back of the line to receive these critical pieces of technology which are used in nearly all electronics such as our phones and laptops. But that’s not the end of it. What initially started as a chip shortage in the auto industry has now evolved into a global chip shortage affecting all industries. Even as economic activity has returned to pre pandemic levels, the chip shortage has persisted. Coupled with supply chain disruptions fuelled by post-pandemic pent-up demand and recent lockdowns in China, car makers are struggling to manufacture cars to meet demand.
What’s the Current Car Inventory Status?
Car inventory levels hit their lowest levels towards the end of 2021 since the 2008 global financial crisis. However, the needle seems to be moving ever so slightly in the right direction.
Car manufacturers are finding ways to deal with the chip shortage by selling most new cars via preorder and using less chips in their vehicles.
Is the Car Inventory Shortage Over?
In short, no. Asbury Automotive Group, amongst other powerhouse publicly traded dealer groups, anticipates that new inventory levels will continue to remain low in 2022. But there have been positive developments recently that supply chain disruptions and the global chip shortage which have plagued the auto industry for the better part of 2 years are showing signs of easing. Volvo’s CEO Jim Rowan announced that Volvo Cars’ semiconductor inventory is now “back at full supply”. The U.S. congress passed a bipartisan bill that will provide $52 billion in funding for U.S. companies producing computer chips to beef up local chip manufacturing and rely less on global supply chains. As such, most industry forecasters, including Cox Automotive, expect the chip shortage and other supply chain disruptions to gradually improve throughout the second half of the year.
How to Overcome the Car Inventory Shortage?
One of the best ways car dealers can overcome the current car shortage is by ensuring that marketing is in place for pre-order and that they have the necessary infrastructure to respond to an ever-changing market. It’s critical for dealerships to hone in on this now before it’s too late.
As dealerships look to build a flexible and dynamic tech business, there are two critical pieces to consider: automation and consolidation. Any technology should replace monotonous, manual legwork with real-time optimizations that can scale marketing and sales operations beyond any human capability. This is done best when coupled with a data consolidation strategy, making sure all dealership data sources hook into one hub for marketing execution.
Contact us today to discover how we can help you scale your business.