By Madeline Klein on May 20, 2022 in Life Hacks
The current car shortage should be on its way out in the next year or so. Yet, it’s important to understand what happened and how you can buy a car during a car shortage if necessary.
So, why is it hard to find a car right now?
Let’s go back to March 2020, we know you might not want to, but bear with us. When the COVID-19 pandemic began, many factories closed for safety. This delayed production of many items and brought on a significant list of backorders. Also, the transition to work-from-home required many individuals to buy computers which caused a strain on chip production.
You might wonder, “Hm, but why the auto industry in particular?” Due to the swell of consumer electronic sales, chip producers focused on that market instead of cars. So, when the automakers re-opened factories, only a few chips were available. Since they focused on consumer electronics, they couldn’t quickly pivot back to the car chips. So, automakers prioritized their higher selling, more expensive vehicles with the small number of chips they had.
This whole situation led to drivers being priced out of new cars and turning to used cars instead. So, let’s talk about the used car market.
How does this impact the used car market?
We understand why new cars might be hard to track down for less than a pretty penny, what about used cars? Unfortunately used cars are as bad, if not worse. NPR describes buying a car right now as “a miserable experience” and that includes used cars. At the beginning of the chip shortage, fewer new cars lead to increased used car sales, but there weren’t enough to satisfy demands.
Kelley Blue Book gives us a quick answer to the question, “Is now the time to buy, sell, or trade-in a car?” They warn us that new car prices will slowly come down and used cars will likely be slower. While supply is still very limited for both, it’s improving. KBB determined, “Older, less-expensive cars are the hardest to find” especially “used cars priced under $10,000” and “vehicles in the $10,000 to $15,000 range”.
How to find the perfect used car in a scarce market
- Be patient and wait it out.
If purchasing a new ride isn’t urgent, we recommend waiting it out. Making an impulse decision here could mean overpaying for something you don’t love. According to CNET, LMC Automotive predicts that car shopping will take 2022 and some of 2023 to return to normal.
- Be prepared.
The first step? Educate yourself about why the car shortage is happening and the estimated timeline. If you’re here, you can check this one off your list.
Then, research market prices. Edmunds warns, “It is increasingly common in the market to see a vehicle marked up with a price that’s higher than the MSRP on the window sticker. This “market adjustment” can range anywhere from a few thousand dollars to upwards of $30,000 on rate and in-demand vehicles. Be sure to look at comparable vehicles nearby to understand the market rate and where to snag the best deal.
Finally, shop around for financing options. Cars.com recommends getting preapproved so you have your loan locked and loaded before hitting up the car lots. This planning creates realistic expectations about what you can afford and how far you can flex your budget, if necessary.
- Be ready to act fast.
Short supply means cars move fast off the lots. If you see “the one”, get ready to jump on it fast or someone else might swoop in and you may miss out on it.
- Be realistic.
While there might be a specific model you’ve dreamt about for years, it may be time to expand your search to other models, trims, and packages. We are probably breaking your heart right now, but we promise there are other great rides out there for you!
If there are must-have features, plan to focus on those and cut out the features you can live without. Doing so will add more vehicles to your wish list and then you’ll have more options during your search.
Pro tip: Consider a different brand. Most brands manufacture many makes of vehicles with similar features. Consumer Reports breaks down these relationships for us. So, if you have a Cadillac in mind, you can opt for a different General Motors brand like Chevrolet, Buick, GMC, Pontiac, Saturn, or Hummer.
- Be flexible.
If you find a vehicle with the features, safety, and reliability you’re looking for, it’s time to look past paint color. Readers asked if car color matters for safety and resale. Turns out, while black cars are the highest selling, with white right behind, there are studies suggesting car color has no impact on safety or crash risk. With resale, classic color options tend to hold value better than trendier, showier choices. However, darker colors show dirt and scratches more than lighter colors. At the end of the day, there’s nothing wrong with simply choosing a car color because you like it, but the paint color also shouldn’t deter you from your dream ride.
Another way to be flexible is to look outside your immediate area. This is easier than ever with handy websites like Auto Trader and Cars.com! Purchasing in another city shouldn’t add any extra stress, because most paperwork is done online or mailed overnight, and many dealers will meet you halfway for pick-up or even ship the car straight to your driveway.
$$$. Let’s talk pricing now.
We mentioned earlier you should get preapproved for your loan before beginning your search. During that process, negotiate financing. Money Crashers explains while you might not be able to negotiate price in this market, you can still negotiate your financing. Things like annual percentage, length of the loan, prepayment penalty, and any fees are all fair game for negotiation.
If purchasing a car outright isn’t in the cards, investigate leasing or buying the lease you’re currently in. Leasing is a great temporary option until you’re able to find your perfect ride. Plus, if you enjoy the ride you’re leasing, you most likely have an option to purchase it outright.
Looking for another way to lower cost? Trade in your old car. With the need for cars, used car values are continuing to rise. While some brands may buy you out of your lease early and some dealerships will offer to purchase your ride from you, be sure to do some market research to ensure you’re getting the best deal for your trade.
Pro Tip: Complete any low-maintenance repairs and tune-ups before you trade to get the most band for your buck.
Kelley Blue Book has some great tips if you want to get on the waiting list for a fresh off-the-line car. The perks of this purchase include you can get exactly what you want, you’re aware of what the price is, and some of them can be completed 100% online. You can start this process on the manufacturer’s website. Most of the time you have to place your order through a dealership, and each dealership has an allotted number of each model they can order in a certain time frame. However, these waiting lists might be shorter than the time it takes the market to return to normal.
- Go electric.
The manufacturing of electric vehicles is on the rise and not likely to back off anytime soon, especially with our current gas prices.
Opting for an EV or hybrid can save you a good chunk of cash with federal tax credits, as well as lifetime ownership costs. Keep these vehicles in mind when you’re searching.
Get everything in writing. This is crucial for all car purchases because new or used cars are sizable purchases for most people. However, it’s especially important now with high demand causing price markups. So, make sure to get the final firm price and any contract additions in writing with the dealer’s signature.
At the end of the day, remember to stick to your guns. Smart Money Mamas tell their readers, “Don’t feel intimidated to ask for what you want. If your exact price can’t be achieved, perhaps there are additional products or features that would make it worthwhile.” Although you might have to sacrifice some elements, make sure that you’ll be happy with your final ride or push off the purchase until you are.
If you’re currently on the hunt or have hunted for several months already, we’re here to cheer you on. Use these tips and remember to stay positive, your dream ride is out there!