Note: This article originally appeared on TrueCar.com.
Shopping for a new or used car in 2021? You may have noticed that your experience is a lot different than in years past. If finding the car you want seems more competitive, it’s not just your imagination. Recent market conditions, largely due to factors related to the novel coronavirus pandemic, have changed the landscape for both buyers and sellers.
Here’s what you need to know, with tips on how you can plan ahead to make the purchasing process as painless as possible.
Why are car prices higher than usual right now?
The price you pay for a car changes all the time, and for all kinds of reasons. As of summer 2021, supply is low and demand is high. Dealerships across the country can’t replenish their lots fast enough. When inventories across the board are depleted, sticker prices will be higher than usual. If you’re looking to buy a popular vehicle, you may end up paying above the MSRP (Manufacturer’s Suggested Retail Price).
So what’s behind this vehicle inventory crunch? The culprit is a global shortage of microchips that has been reducing the supply of video game consoles and smartphones. Now, that shortage has significantly impacted the automotive industry.
All modern cars use computer chips in some capacity. Even if the vehicle doesn’t have self-driving capabilities, a computer is still used to operate functions such as keyless entry, automatic climate control and even the stereo.
The COVID-19 global pandemic affected the supply chain for all kinds of products. In the beginning, there was an increased demand for office technology and a reduced demand for cars. But as more drivers continue to get back on the road, the demand for cars has risen.
Currently there aren’t enough microchips allocated for automakers, reducing the number of new vehicles that can be produced. And with fewer cars available, many buyers are willing to pay more than usual for them.
How can I find an affordable new car now?
Inventory has been cut in half, so vehicles typically are spending two weeks less time than usual sitting on the dealers’ lot. Couple that with high demand over these last few months, and you’ve got the recipe for a seller’s market.
If you’re looking to buy a new car, you’ll have a harder time finding the specific color and trim you want. And although interest rates may be low, you won’t see the same discounts and incentives that you might otherwise expect.
To be clear, dealers are not trying to take advantage of the current situation. Increased sale prices are a response to market conditions, just as the beginning of the pandemic led to unprecedented deals due to low demand. To put it in perspective, around one in five vehicles sold for over MSRP during May 2021.
You can see what others have paid for the car you want using research tools available through the NEA Auto Buying Program, which shows the market average for many 2021 and 2022 model-year vehicles.
If you’re looking for a great deal on a new car in 2021, you may have to exercise a little patience. Depending on where you live, there’s a chance you’ll have to visit dealerships outside of your local neighborhood.
If you don’t need a vehicle right away, or if you’re looking for something specific, you can ask the dealership to let you know when the car you want is back in stock.
Are used cars affected by these supply-and-demand issues?
Yes, for several reasons. Used cars have also seen a meteoric rise in value, as a perfect storm of shifting lifestyles and stimulus checks helped drive up demand. As a result of new-car inventory issues, many shoppers who wanted to get a new car have had to expand their options, making it more competitive to buy a used or certified pre-owned vehicle.
As long as new-car production issues continue, you can expect used cars to be priced higher than usual.
Just like new cars, used cars are spending less time on the lot and on online listings. When you see a car you like, you may want to act quickly. A vehicle in good condition and with low mileage can go faster than you’d expect, especially if it’s a popular or rare model.
Used car prices may be higher right now, but there’s a silver lining: If you need extra cash or find another car you like, it’s a great time to sell or trade in your vehicle. At the moment, the average trade-in value is 49% higher than May 2020.
You can use NEA Auto Buying Program’s trade-in tool to see the value of your car and get a cash offer in minutes.
How much longer will these car inventory issues last?
Nobody knows exactly when vehicle production will stabilize. With the global microchip shortage in full effect, it may take months before supply catches up with demand. But while it may be more difficult to buy a new or used car in 2021, the situation will improve sooner or later.
If you have a vehicle you don’t need at the moment, there’s never been a better time to see what your used car is worth.
In the short term, you may have to be more patient when trying to buy a car. Dealerships are doing their best to meet demand, and everyone is dealing with limited inventory.
The market is even affecting car rental companies, which also purchase vehicles as part of their fleet inventory. Keep that in mind as you plan your next vacation, especially as travel and tourism picks up again and more people will be booking short-term car rentals.
Use your NEA member benefit to make car-shopping easier
Right now, it can be more important than ever to find a great price on the vehicle you want. Get started by using NEA Auto Buying Program to do research and shop online in the comfort of your own home and also get an upfront, personalized offer from a Certified Dealer before you head out to the lot.
Statistics featured in this article are based on data available to TrueCar as of 6/2/2021. Average pricing and inventory levels are subject to change without notice, and individual vehicle prices may vary by factors such as location, individual vehicle attributes, and dealer.