Experts Warn of Summer Car Shortage -- Should You Buy?
by Brittney Myers | Published on June 26, 2021
The laws of supply and demand are clear.
It's hardly news that the pandemic has impacted most industries, and merchants have been dealing with shortages of all kinds for more than a year (no doubt the Toilet Paper Famine of 2020 will be infamous for generations).
Earlier this year, lumber and appliances shortages caused construction prices to skyrocket -- and the auto market could be next.
While many types of consumer products have been hard sells for most of 2021, the auto market saw some of its best months in a while in April and May of this year. Now, between high sales and manufacturing delays, new car inventory is markedly low. And, as we see each time the economy struggles, the used car market is looking pretty tapped out, too. When times are tough, folks hang on to cars they might otherwise have traded in or sold for an upgrade.
Altogether, both new and used car inventories have hit record lows. And, as many of us learned while hunting for toilet paper, consumers get a little trigger-happy when they hear about shortages.
Does knowing that numbers are limited make you itchy for some new wheels? Well, you should probably think twice before heading to the dealership.
It's a (car) sellers market
Any basic economics class will cover the fundamentals of supply and demand. When supply is low and demand is high, prices go up. And up.
The salesman's dire warning to "buy now before they're gone!" is usually just a sales tactic. Right now, however, it's actually the truth. Inventory is limited, and dealers are less concerned about finding customers to sell to than they are finding inventory to sell to them.
What does that mean for you? Auto prices are rising like a rocket, and that rocket doesn't seem to be running out of fuel any time soon.
Loans may be harder to get
The other side of the equation is financing. With prices higher than ever, you're most likely going to need a larger auto loan to get a car. This may not be as easy as you think it will be.
Banks don't like risk. As the economic impacts of the pandemic became clear, many banks set to work limiting their risk -- and a big part of limiting risk is getting stingy with the loans. On the credit card front, we saw issuers cut credit limits and increase approval requirements. And they took similar actions with loans.
As a result, you're likely going to need a better credit score to get an auto loan than you would have before. Even if you're approved, you may not be offered as large of a loan as you would have received in 2019.
Save now and buy later, if you can
Many folks are heading back to their offices or even just back to the stores. If you're leaving the house for the first time in a year and eyeballing your ancient car from the Before Times, it could be really tempting to celebrate the end of your confinement with a new ride.
Well, you aren't the only one. But, the early birds beat you to the proverbial worm. Auto inventory shortages are here, and they brought jacked-up prices along for the ride. Between the inventory issues, high prices, and wary lenders, this summer could actually be the worst time to buy a car.
Unless your car is on its last legs -- or tires, as it were -- you're probably better off waiting for inventory to recover before trying to buy a new (or new-to-you) car. Your savings account will thank you.
If you absolutely do need a new car, be sure to do your research. Know the market price on a vehicle before you even hit the lot so you know exactly how much more you're being asked to pay. And if you're looking for a used car, get it checked out by a reputable mechanic when possible. With inventory so limited, you're probably not getting offered the cream of the crop.
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