Last year I moved back to the U.S. after living overseas for nearly a decade. I lived very modestly and didn’t need a car as I worked and traveled through Southeast Asia. However, living in the U.S. is an entirely different story. Since I was working from home, I thought I could get by without having to commute daily. Unfortunately, getting around in the U.S. with only public transportation was much more difficult than I expected. Needing convenience and independence, I began shopping for a used car. Imagine my shock when I discovered the market had completely transformed since my last purchase. It was one of the most stressful and difficult shopping experiences I have ever had. Unless you have an urgent transportation need, here’s why you should wait to buy a car.
Looking to Buy a Car in 2021
I spent months researching different vehicles. Although I wasn’t driving every day, I was often going long distances and using back roads. Ultimately, I settled on the Toyota RAV4 since it met all of my minimum requirements of reliability and safety. With the decision made, I focused on the search. I started with models that were about 10 years old since that’s what I expected was within my budget.
However, even these older models were extremely overpriced. Furthermore, none of them had all the features I needed. I adjusted my search once again since newer models had better fuel efficiency with only a slightly higher price by comparison.
Once I narrowed my scope to 2017-2019, I spent hours calling dealerships and arranging test drives in the area. At the same time, I was also scouring national websites looking to see if I could find what I wanted at a better price. After a few failed negotiations and missed deals, I finally found a car. The catch was that it was in another city. So, my husband and I picked it up in Chicago and drove it home.
3 Reasons Why You Should Wait to Buy a Car
What I learned from this experience was that had I been able to, I should have waited to buy a car. Here’s why.
1. There is a global microchip shortage.
There is an ongoing global shortage of semiconductor chips. And, no one can be sure how long it’s going to last. Some industry experts say it could extend well into 2023. Not only does it mean that there are fewer new cars available, but it has also supercharged the demand for used vehicles.
These microchips are required for many systems, so manufacturers had to cut production due to the shortage. Dealerships are receiving fewer vehicles and new car inventories are only a third of what they usually have. Many lots sit empty as they wait for more vehicles to arrive.
In an attempt to meet consumer demands, manufacturers are eliminating things that rely on the semiconductor chip to function. So, even if dealerships are getting new cars, they may not have all the features you would expect.
2. Less inventory equates to higher prices.
Right now, the car industry is a textbook case study of how supply and demand work against the consumer. Limited inventories and increasing demands for new and used vehicles have caused prices to skyrocket. Many dealers are charging more than the MSRP because people are willing to pay it.
According to Edmunds.com, 50% of people are paying more than the sticker price. In June, the average price for a new vehicle was $42,331 which is 8.6% than last year. For a used car, the average price shot up to $26,457, a 27% increase from the previous year.
Unfortunately, this also means dealerships are less likely to offer discounts or negotiate on price. If you aren’t willing to pay the asking price, you can be certain someone else is.
3. It’s harder to find what you want.
There is no doubt that it is currently a seller’s market. What makes it even harder is that many vehicles never even hit the lot. It is becoming more common for buyers to make deposits even before the new cars arrive, sight unseen.
Some analysts suggest that the car market may never return to normal since manufacturers are rethinking production and sales strategies. So, if the car you want isn’t in your budget, you may have to compromise. Many consumers have to settle for cheaper options. This could mean choosing older models with higher mileage, different colors, fewer features, or a different make and model altogether.
If You Can’t Wait to Buy a Car…
The simple solution is to ride out the price increases and wait to buy a car. Unfortunately, not everyone has the luxury of waiting for the market to improve. Even though it is a tough climate, you can find good deals. But, timing your purchase is important. Many customers shop during sales promotions and other events to get better prices. However, there are also a few other factors to consider.
Any used car salesman will tell you about the quotas they must meet each month or quarter. So, if you shop around the end of these cycles, you are likely to have more room for negotiation.
Choosing the Best Time
You should also avoid going to a dealership on the weekends since many other people are likely to be shopping at the same time. Instead, try to go during a weekday when you will have the salesperson’s undivided attention.
Psychologically speaking, it’s also a good idea to go earlier in the day. People tend to be more flexible when they are in a better mood. So, if you can make a deal before the stress of the day sets in, the sales reps will probably be more open to negotiating.
Know Your Bargaining Position
If you don’t know where to start, read the latest consumer reports to help you choose the best vehicle to suit your needs. And, if you have a vehicle to trade, the market will work in your favor. Elevated prices guarantee that dealers will give you the best trade-in value possible.
Although these tips might save you a few bucks, you can be sure you are going to pay more for a vehicle if you buy today. And until microchip production returns to current levels, you can expect it to be that way for a while to come.
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