Whether you’re looking for a specialty high-performance vehicle or you simply want the most basic model you can find, 2022 is a challenging time to buy a car.
There are a lot of factors impacting the automotive industry, and below, we’ll talk about some of these and what you can expect if you head to a dealership right now.
Why Is It So Hard to Buy Right Now?
You’ll see a lot of headlines and shared social media experiences describing car buying right now as a miserable experience. So what’s going on?
The University of Michigan polls consumers and has been doing so for more than 50 years on whether or not they think it’s a good or bad time to buy a car. Currently, based on their results, more people say it’s a worse time to buy than ever before in the survey’s history.
If you have a tight budget, it can feel more like a crisis.
According to data from Kelley Blue Book, the average used car is selling for 42% more now than it did before the pandemic.
If you’re someone who needs transportation, rather than someone who’s buying out of a want, you’re going to have an especially hard time.
The auto market is still dealing with the effects of the pandemic, which radically shifted the supply and demand balance.
Carmakers cut outputs as they try to find the materials they need, like chips, and the shortage of vehicles coming into the market is creating ripple effects whether you want to buy new or used.
Auto companies aren’t just changing the number of vehicles they’re making but also the types. They are putting their attention on their most profitable and, therefore, most expensive cars.
Companies are making fewer entry-level crossovers and sedans compared to what they were producing a few years ago. They’re making more luxury pickups, SUVs, and similar types of vehicles, with high-end features.
Carmakers are essentially saying that if they have a limited number of chips to work with, they’re going to put what they do have into their most expensive cars.
This means the prices of new vehicles have gone up dramatically. Then, when someone is priced out of the new car market, they’re likely to start shopping used, and that raises the prices there too.
Automakers see record earnings, though. For example, Ford recently said it had its best year since 2016, citing a strong mix, which means a higher ratio of more-profitable cars and vehicles.
Dealerships, while they have a limited inventory, are seeing their profits go up because everything that is available is leaving the lot so quickly.
How Long Will Things Be Like This?
China and countries in Asia are still locking down for the pandemic, which means that there’s not a lot of hopeful news on the horizon if you need a new vehicle.
Some think it could be at least next year before the supply chains for chips will go back to normal. Even the most optimistic think we’ll be dealing with the fallout of the chip shortage for most of this year.
Car companies and executives heading them up to have told investors that the profitable months they’ve had are making them realize they produced too many cars before. In 2019, there were around 4 million cars in the stockpile. Now it’s around a million.
While car companies might like the idea of continuing to focus on expensive car production and vehicles that have high margins, it might not always be an effective strategy for them. For example, many consumers have said that if things keep up as they are right now, they’ll change their car-buying habits for the foreseeable future.
Tips for Buying Right Now
If you do have to buy a car right now, or at least you’d like to, the following are some tips to keep in mind.
- Prepare yourself. The best thing you can do is go shopping for a car with the understanding that it’s not like a few years ago. You’re not going to be able to go to a car dealership, do some test drives, and then head home to think about things. You’re also not going to get a good deal, more than likely, and you’re probably going to be paying sticker price, and in some cases, even more. Reframe your expectations.
- Do research online before anything else. You want to learn about the fair price for vehicles you’re looking at.
- If you’re shopping for a car this year, be flexible. If you go to the dealership with a long list of must-haves, you’re probably going to leave disappointed. You might need to change not only things like the color or trim options but the make and model you’re thinking about. Certain manufacturers like Kia and Hyundai have had a better time dealing with their chip inventory, so you might find some options from these carmakers.
- Look beyond your zip code during your search. You may even end up crossing state lines to find a car that works for your needs and budget.
- Something else you can do is order a new car. A lot of companies will let customers order directly from the factory. You can get the car built how you want it, plus you avoid the markup from the dealerships. If you order your vehicle, some manufacturers are even offering discounts. You do have to be patient if you go with this option because it can take six to eight weeks to get your new car.
Finally, don’t assume used cars are going to be the best deal or represent a bargain. You have to consider not only the price when you buy a car but also its condition. If you’re getting an older car that’s experienced a lot of wear and tear, then you might have to replace it much sooner. Dealers also offer better financing options for new vehicles, so don’t automatically count them out.