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Britt Erica Tunick is an award winning financial journalist who has spent the past 17 years writing about virtually every aspect of finance.

How COVID Has Changed Year-End Car Buying

How COVID Has Changed Year-End Car Buying

By Britt Erica Tunick

You have probably heard that the best time to buy a new car is the end of the year when dealerships are looking to meet sales goals and unload leftover inventory as they shift their focus to sales of models from the coming year. That’s usually true–just not this year.

Supply chain issues related to the COVID-19 pandemic are having an impact on the availability of virtually everything–from toilet paper to toys, and particularly automobiles. As the need for remote and hybrid work and schooling created a massive spike in demand for electronics such as laptops, it significantly increased the number of microchips needed by product manufacturers around the world–at the very same time social distancing protocols temporarily grounded production to a halt at many chip makers. The result has been a worldwide microchip shortage that has hit the auto industry hard, as manufacturing of the average new car now requires roughly 100 microchips to control everything from dashboard component to safety features and even fuel management, causing a major drain on the supply of new automobiles at dealerships around the world.

As 2021 winds to a close, instead of looking to unload an overstock of 2021 vehicles at discounted prices as they would typically be doing, car dealerships are struggling with demand that far surpasses the number of automobiles they are able to get right now. Instead of saving an average 8.3% by purchasing a new vehicle at the end of this year, car buyers could find themselves paying that much or more above the manufacturer’s suggested retail price. In fact, it has become quite common for people purchasing new cars this year to pay several thousand dollars above the sticker price. And things aren’t any better when it comes to buying certified pre-owned or used cars. Higher costs and a lack of availability of new cars has shifted people’s focus to used vehicles, resulting in a price surge there as well. As of October 2021, the cost of the average used car in the U.S. is 29% higher than a year ago, according to Consumer Reports partner TrueCar.

What all this means is that if you don’t absolutely need a new car, now is not the time to buy and you will be better served by waiting for the supply chain issues to work themselves out. That, however, could take up to two years, according to analyst predictions.

If you absolutely need to buy a car in the near future, following are a few things to keep in mind:

  • The microchip shortage has not hit all car manufacturers equally, so if you are looking to purchase a new vehicle make sure to do your research and look for brands where there is greater availability and you are less likely to have to pay more than usual.
  • Consumer demand is highest for SUVs and trucks, so the more reasonable prices for new cars will be found with sedans and other smaller vehicle models.
  • If you are trading in a used car as part of your purchase of a new car, do your homework first. As dealers are scrambling to find used cars, and often making more money off of them in car auctions than they do on sales of new cars, they should be paying more for your trade-in. If you are offered a low trade-in value for your existing vehicle, it may well be worth your time and effort to sell your used car on your own.