by Charles Sena and Michael Klyde
Having trouble finding a new vehicle or used vehicle at the right price - or at all? Buyers beware! It's a tough market for individual consumers, families and small-to-medium business owners wanting to purchase or lease a new or pre-owned vehicle.
CARtegrity finding the following happening in the current automotive marketplace:
There are often more buyers than units available for sale.
Manufacturers and car dealers are taking advantage of this imbalance -- and squeezing the consumer to achieve historically above-average profits.
With persistence, vehicle knowledge, and patience, deals can still be found.
For example, at FORD and RAM dealerships the popular FORD F-250 and RAM 2500 trucks, especially those with the luxury trim levels, are hard to find. This is due to a number of major issues in the supply chain of vehicle manufacturing and parts supply, as well as some other factors.
4 Reasons Why
1. There is a global chip shortage. The most recent year-long shut down of non-essential work had significant impact on car manufacturing. The 2020 stay-at-home orders for non-essential work shut down automotive assembly plants. As a result, just-in-time parts delivery was stopped. In doing this, an unexpected supply chain event occurred. Computer chip suppliers sold their cancelled orders from the auto manufacturers to the game station, phone, smart TV and computer manufacturers, who were experiencing surging demand; with so many people home for the duration, they upgraded phones, laptops, TVs and bought their kids (and themselves) new game consoles. Those sales have not subsided.
These chips are used in all vehicle computer-controlled systems, though the ones impacted most are infotainment and safety related systems like adaptive cruise control and lane assist. This shortage is expected to last for several more months as you cannot easily add capacity in the USA to make these chips at a price that is competitive with the low labor cost markets (e.g. Southeast Asia.)
Vehicle production quickly ramped back up last in Fall 2020 and two rounds of stimulus checks put buyers back in the market, not to mention the rental car companies (e.g. Hertz, which filed for bankruptcy) that are now trying to rebuild their fleet inventory, thereby seeking to devour much of the vehicle factory output. However, the chip companies cannot produce any more than they are. Adding to the backlog and low inventory was a key supplier's plant catching fire recently and only a portion of it is back online.
There are also ongoing shortages of foam and plastics related to the deep freeze in Texas disrupting oil supplies used for these products along with steel, aluminum and precious metal shortages used in catalytic converters and hybrid/EV batteries. These issues are not easily corrected, and demand is much higher than vehicle supply right now. No manufacturer has been immune to this.
2. COVID-19 took out a large number of workers on the assembly line. Despite the presence of a vaccine slowly (albeit with increasing velocity) working its way through the labor force, factory assembly lines continue to stay at lower-than-normal numbers. Factories were looking to make up lost ground from last year with higher output at their plants. However, with COVID-19 they are falling far short in many cases, as workers are absent due to the virus or taking care of a family member with the virus.
3. Knowing that inventories are limited, manufacturers are offering fewer factory incentives on new vehicles and most dealers are squeezing as much profit per unit as possible, meaning fewer discounts. Many units, in particular the luxury models, are being sold over the MSRP, or window sticker price. There is also less choice when visiting a dealer for the vehicle in the color and equipment desired. Manufacturers are carefully controlling inventories right now, as they are able to make more money selling fewer vehicles, as incentives are not as necessary, especially for higher demand vehicles with desirable option packages. It may be very difficult to find the vehicle you want and if a particular dealer does have it, the process is similar to the used car market, where you cannot just tell them you will "go to another dealer and get one just like it," as vehicles are in short supply.
4. The new vehicle shortage has ricocheted through the used car market. As fewer new vehicles are available, many consumers have elected to "buy used." This has created a surge of demand for pre-owned vehicles. Combined with the fact that many live industry auto auctions were no longer in person -- instead, were done online -- this created rising demand by dealers for used vehicles, adding to the spike in prices.
These four scenarios are creating a seller’s market making it difficult and time-consuming to buy a vehicle. However, consumers can get ahead by leveraging the services of vehicle concierge service, such as CARtegrity. Let us help find you a vehicle in the color you want, with the features you need at the best possible price in today's challenging market.
Recent Success Stories:
Joe, a Torrance-based contractor, was recently looking for a two to three year-old used Ford F-250 Lariat in March. But as it turned out, pandemic pricing was unusually high on used trucks with 20 - 40k miles, and for just another $4 - 6k, CARtegrity found Joe a new 2020 Lariat from a dealer in Houston, TX. Even adding delivery costs, Joe saved thousands of dollars. Today he is happily driving an even better and newer truck than he originally envisioned.
Angela, a Whittier-based restaurant owner, was looking for a new Range Rover Velar in late December 2020. After a comprehensive search, CARtegrity found her a 2020 unit at a terrific price from limited inventory in Newport Beach saving her considerable money and time.
Charlie Sena is Founder of CARtegrity, LLC, a vehicle consulting firm which serves as Consumer Advocate to individuals and small businesses seeking to buy and sell vehicles. Mike Klyde is an Automotive Technology Instructor at Cypress College where he serves as Coordinator of the top Toyota T-TEN program in the USA.