Buying or selling a car? Keep these things in mind

If you’ve been in the market for a new or used car since the pandemic hit in March 2020, you may have noticed a shortage of cars. Supply chain woes have hit a number of industries, driving up prices and helping to fuel inflation nationwide.

The global supply chain challenges have reduced the stream of microchip processors auto manufacturers need to produce new cars. These chips are needed to control everything from infotainment screens to fuel management and stability control.

Scare microchips means fewer new cars as automakers slowed or paused production when the pandemic first started. For the cars that are on the lot right now, dealers are likely offering few pricing incentives.

CNBC reported in January:

“The average transaction price for a new car is now higher than the manufacturer’s suggested retail price, or MSRP: $45,872 versus $45,209, according to the most recent data from Edmunds.” It’s estimated that 89% of car shoppers are paying more than the sticker price or within 5% of it right now.”

The drop-off in inventory isn’t getting any worse, but it will be a while before it gets back to normal. Inventories are expected to remain low for 2022 and prices high, according to CNBC.

Inflation, the new car supply chain woes and higher prices have impacted the used-car market.

High inflation isn’t going away anytime soon, according to Forbes. Prices are going up at their fastest rate since the early 1980s, and rose 7.5% in January compared to the year prior, according to the most recent Consumer Price Index (CPI) report. This marks the biggest annualized growth in CPI inflation since February 1982, Forbes reported in February.

At the same time, searches for used cars are up and a used car doesn’t sit on the lot for long before it’s sold. That means higher prices in a hot market.

Buyers are paying an average of $29,011 for a used car, up 27.9% from a year ago, Edmunds’ data shows. That ranges from an average $14,124 for 9-year-old cars to $30,334 for a 3-year-old vehicle.

While it’s tough to predict the future, KBB.com reported in February that used-car prices have stabilized “at least temporarily, but remain historically high.” Inventory is starting to recover, particularly in the used-car market.