Where have all the cars gone?
How long will the new car shortage last? Strap in your seat belts and prepare for a long ride. Used and new car shortages could linger on for the entire year.
At Le Car we help people with their car shopping questions. And this year there are so many questions. Car shopping is even more confusing than usual.
One of our recent Le Car users, who we’ll call “IW,” contacted us as they began to look for an SUV with two rows. IW had a budget in mind and a set of needs that helped them narrow down their choices, and were open to both new and used cars. Their priorities were safety features, winter driving, space, reliability, and a sweet sound system. Together we selected a list of five vehicles that matched their criteria. The trouble was that every time they tracked down a vehicle to test drive, the car was gone by the time they arrived at the dealer. They had multiple searches going on several car shopping platforms, but at writing they are still waiting for a car on their list to become available. Now they are reconsidering their interest in a two-row SUV and dreaming of a ‘90s car like an old Volvo or a new station wagon.
We hear the same sentiment from so many shoppers: it’s hard to find cars to buy. Everyone wants to know where all the cars have gone.
We’re well into 2022, and still, two years after the pandemic transformed the world, the auto industry is still figuring it out. The supply chain slowdowns were tied to an initial stalemate of car sales (and driving altogether) in the spring of 2020. Carmakers cancelled orders, but as things began to ramp up and everyone wanted to buy cars for escape or trade in overdue leased cars, there was a backlog. The problem was further exasperated as a major fire took out a manufacturing facility in Japan that made a substantial part of the semiconductors. Semiconductors power up all the sensors that make modern cars from seat heaters, backup cameras, to infotainment systems. Modern cars have thousands of semiconductors. Carmakers are rethinking their supply chain decisions, but sources throughout the industry tell us the shortages will drag on until third or fourth quarter of 2022.
In the meantime, used cars are still flying off lots, often before their listings are updated. I’ve heard stories of all sorts of shenanigans as desperate dealers seek to buy back newish cars to resell them far above market value. I have friends who’ve been told there are no cars to test drive. The days of advertising cars to get them off the lots are on pause. It’s the first time I remember demand exceeding supply, and combined with the rise of online car shopping, the field is a bit wild.
BUY NOW OR WAIT IT OUT?
It’s not imagination. Car inventories for both new and used cars are now at an all time low, according to a recent IHS market forecast. “Patience remains the best advice,” Sam Fiorani, vice president of global vehicle forecasting at AutoForecastSolutions, said in an interview with Cars.com. “If you have an extra vehicle, take advantage of the current shortage of used vehicles and get as much as a dealer or another buyer will pay while you can. If you do not need to replace your current vehicle immediately, don’t. Prices should come down as inventories rise throughout 2022.”
For new car purchases, things should like brighter by the end of the year. Cox predicts limited vehicle supply should gradually improve over the year, and reports. “The worst of the ‘empty-lot syndrome’ is likely in the rearview mirror.”
But as we’ve learned during this pandemic era, no predictions are absolute.
IF THE LEASE IS UP, DON’T PANIC
If a lease is coming up for renewal, the lessee is actually in a good bargaining position. In fact, because of new car demand, the dealer may be more than happy to trade in on a lease on a vehicle they can resell at a premium profit. Le Car user CW reached out for advice on her dealer’s offer to trade in her BMW X7 eight months early. It was a hard choice, because her blacked-out X7M was a slick ride and a splurge that made her feel powerful in lieu of a typical mom car and she wasn’t quite ready to say goodbye. But she likes new-new cars and wasn’t ready to buy out the lease and commit to longterm ownership or take the chance on finding inventory in summer. She opted for the deal and ended up in a 2022 Land Rover Ranger that the dealer wanted to move off the lot. While she loved her X7, she was open to trying something new. After weighing out her options, she realized she could always get back in the X7 in a few years from now. If consumers stay flexible, they may have considerable negotiating power as lessees.
BEST CARS TO BUY RIGHT NOW: THE EXCEPTIONs
Contrary to the word on the street, there are cars to be bought, that don’t require paying far above the listed price or what car companies call the MSRP. This is true for some top-of-the-line new sedans and pickup trucks. The reason for this is that car companies tend to make the biggest profit off the most expensive vehicles, which extends to luxury cars and pick up trucks, and automakers are prioritizing chip allocation for these rides. Tyson Jominy, vice president of data and analytics for JD Powers told Automotive News, “The automakers have focused on higher profitability segments — we’re seeing pickup truck inventory improve. Large premium cars — Audi A8, Mercedes S Class. Very few people are looking for these cars. This is the top of the pecking order for price, features and technology.” In the fall I spent some time in conversation with Christophe Starzynski, head of Mercedes EQ, who said that the S-Class and EQS were priorities for the manufacturer. But the flip side of this problem is also true for luxury models, such as souped-up SUVs and sports cars, like the Mercedes-Benz G-Wagon or Porsche GT3s, where consumers are paying car dealers extraordinary fees for access and to cut the line on waiting lists. We don’t recommend being this buyer, on general principle. Remember to shop around — not all dealers will take advantage in this way, and some automakers are pushing back on the extreme markups, which the dealers dictate.
NEED VERSUS WANT
To buy now or wait it out? It all comes down to the car buyer’s wants and needs. A reliable vehicle is essential for getting around town. If the budget is there and it’s going to support consumers getting on with their lives, there are plenty of cars on the road today, even if the economics don’t add up. Or if there was a time to splurge on that high-end sedan, maybe its now. However, especially for used car buyers or those frustrated with what’s available now, consider holding off a few months to see how things shake out. Eventually the system will work again, and its important to remember that owning a car is a long term commitment. Three years from now, how will you feel about an over—priced lease? As an alternative, maybe time to consider entering the bike universe? And while its not a great time to rent a car because of similar inventory woes, there are other alternatives such as the peer-to-peer car-sharing platform Turo.
When searching for your next ride, always better to remember there are always another way to get there.