New car shortage driving up used car prices
MONTGOMERY, Ala. (WSFA) - New cars are hard to come by. It seems there’s a shortage of new cars hitting the lots, and it’s driving up the prices of used cars.
“I should have 300 Chrysler products on the ground this time of year; we got 61,” said Dick Brewbaker, owner of Brewbaker Motors in Montgomery.
That’s the story around the country right now. The shortage is driving the demand for used cars skyrocketing, along with their prices.
“In my 25 years in the industry, I’ve never seen such a quick uptick and use car prices ever before,” explained Scot Hall, who works with Swap-a-lease, a company that helps people transfer their vehicle leases.
Hall says, at least for now, there’s not much difference in the value of a used car and a new one.
“If you have a just used vehicle right now, it may be worth as much as it was new, which is kind of a crazy phenomenon,” said Hall. The reason starts with the pandemic and the shutdown that happened last year.
“We had a lack of new vehicles, not because of any supply chain issues necessarily just because people weren’t going to work to produce them, you know, everybody’s kind of in a holding pattern,” Hall explained.
Now there’s a shortage of computer microchips used in cars for everything from dashboard displays to adjusting the seats. Without those microchips, cars aren’t coming off the production line.
“And that shortage of new cars means that new cars are going to be a little bit more expensive than that they would be under more normal conditions, just simple supply and demand,” Hall said.
And while the supply has dropped, the demand for new cars, especially in the river region, has gone in just the opposite direction.
“We sold almost twice as many cars in April of 2021 as we sold in 20,” Brewbaker explained.
Brewbaker says it’s forcing some major changes in the way he does business.
“We can still take sold orders, and the factory will prioritize the bill. That doesn’t mean it’s going to get here super quick. But we can still do that, order exactly the way they want it., " Brewbaker says. “And dealers do trade cars back and forth. And if we don’t have what somebody wants, we will try to find it for them somewhere else. And provided we have something to trade back that that dealer needs, we can usually work it out. But as inventories continue to decline, that’s going to just keep getting harder to do.”
So the best piece of advice for buying or selling a car right now? Both men say the same thing.
“If you’ve got a car to sell, that you don’t need, you have other ways to get yourself around just and want to sell it, you sell it now, don’t hold back,” Hall said.
“Now is the time to sell it because you’ll never get more money for it. It is a seller’s market when it comes to late-model used cars,” Brewbaker agreed.
According to Bloomberg, used car prices overall were up around 30 percent from this time last year, but the situation is not expected to last.
Brewbaker says his manufacturers are telling him to expect about six more months of shortages. However, Hall believes production will pick back up even sooner than that.
It’s estimated that up to 5 million fewer cars will be produced in 2021 because of the chip shortage, affecting nearly every car brand.
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