If you’ve recently tried to buy a new or used car, you know what I’m talking about. It all started in March 2020 when the pandemic hit and factories closed around the world. This included the automotive assembly lines and, more importantly, the microchip assembly lines that go into our new high-tech vehicles, giving us touchscreens, satellite navigation, heated seats and wireless charging for n to name a few. No microchips, no new cars.
Supply chain issues have hit the auto industry hard. Toyota has suspended production of its popular Prius vehicles because they can’t get enough parts to make the cars and assembly plants continue to have COVID outbreaks. All automakers have the same problems getting enough raw materials, such as resin and steel. Add to that a labor shortage and not enough truckers to deliver the cars and don’t even mention the rising fuel costs to haul the vehicles.
The other issue that hit during the outbreak of COVID was that national car rental companies saw demand drop precipitously. They quickly dumped 33% of their rental vehicle inventory on the used car market and stopped buying new vehicles. A year later, people started getting vaccinated, and travel came back into fashion with a vengeance. The grandparents wanted to see their grandchildren again, not so much their adult children. People wanted to get back on the road, only car rental companies didn’t have enough inventory of vehicles to rent. Horror stories went viral of people having to pay $600 a day to rent a car as supply and demand algorithms went crazy. Since they couldn’t buy enough new vehicles, rental car companies started buying used cars and competing with your local car dealership in auctions for inventory. Supply and demand rallied again as used car prices soared. I’ve heard stories of people selling their 3 year old cars with 50,000 miles for more than they paid for new.
As bad as it is with used car prices, new cars are even worse. With gas prices reaching $7 a gallon, I’m looking for a hybrid SUV. Honest dealers tell me up front, “We don’t have this vehicle in stock. Probably not for three to six months, if we’re lucky. We used to get 20-30 of these vehicles every month. Now we get one or two, maybe. Same 20-30 buyers for these one or two cars. Guess what happens to the price? »
Most new cars now sell at a premium (mark-up) above the MSRP (Manufacturer’s Suggested Retail Price) or, if you prefer to talk car dealership, “market adjustment” prices. If the MSRP is $40,000, expect to pay between $43,000 and $45,000. Supply and demand. If you don’t want to pay the dealer’s premium, the next buyer will. Also, many car dealerships only sell to buyers who live in their county. So if you want a new Toyota Prius, only your county Toyota dealer can sell you one. At their price. Don’t cry for your local car dealerships as they make record profits selling every car, new and used, for maximum price.
Tesla CEO Elon Musk recently said that the factories in Austin, Texas and Berlin, Germany “are currently gigantic money ovens. There should be like a giant roar, which is the sound of money on fire,” as they lose billions of dollars due to supply chain disruptions and challenges in manufacturing batteries for their electric vehicles.
Many automakers will lean towards the Tesla model of consumers ordering vehicles online and delivering the finished product to the dealer showroom a few months later. Remember to order the make and model of car, color, features and upgrades of your choice and the price is set when you order online. All you would have to do is pay a non-refundable deposit by credit card and the online software would arrange your car financing for you. No more negotiating price, upgrades (true paint protection for just $595!), and having to waste hours at the dealership negotiating financing and other minor details.
With the average price of a new car at $45,844 according to JD Power, along with record high gasoline prices, expect automakers to build more electric vehicles (EVs). Today, electric vehicles and plug-in hybrids represent only 5% of the automotive market. This number will increase significantly in the future.
Matthew Owen resides in Eureka and believes the First Amendment allows for free speech.