Supply chain problems have mostly settled down, but anyone who’s been car shopping knows there are still major challenges.
The microchip shortage is still causing trouble, but that’s not the only problem causing car prices to fluctuate — there is still a low inventory problem.
It’s all making it a tough time for car shoppers.
However, there are key takeaways people who are looking to buy a new or used car should keep in mind.
Shoppers that KIRO 7 spoke with in late October noted how barren dealership inventory appeared.
Erik Nelson with Lynnwood Honda, a locally owned dealership, said in October that they happened to have six cars on the lot, but sometimes they had zero available cars ready to buy.
Car shopper Nolan Zimmer said he’s noticed the inventory shortage. He says he went to Honda of Fife and found a very empty lot.
“I pull up and there’s nothing in the parking lot. And I’m like, ‘Is this the service center? Is this where you sell everything?’ And he’s like, ‘Yeah.’ And I was like, dang,” said Zimmer.
He says he’s been looking for a car for about six months.
“How’s this process going?” KIRO 7′s Deedee Sun asked. “I mean everything is jacked up, like extremely,” said Zimmer.
Things are better at Puyallup Nissan.
“Today as we stand, we have 58 cars on the ground,” said Luke Korum of Bill Korum’s Puyallup Nissan.
“Pre-pandemic, how many cars would be out on the lot?” Sun asked.
“We would carry, before 2020, anywhere between 300 to 400 new cars,” said Korum.
The good news for Puyallup Nissan is that Korum says the supply chain problems are easing up for their dealership.
“We are getting almost a thousand (vehicles) in the next four or five months,” said Korum.
However, that’s not true across the board.
AutoForecast Solutions says manufactures will produce about 3.2 million fewer cars than planned this year in 2022. That means consumers — particularly those looking to buy a new car — can forget about negotiating on price.
“(I asked), ‘Can you fudge at all?,’ And he’s like. ‘No,’” said Zimmer, who was shopping for a Toyota Ridgeline truck.
“If you wanted it, you had to get it,” said Tracy Sanders, who also bought a car with her husband Jorge this year.
A lot of the trouble is still related to the microchip shortage, but as other industries have stabilized, why is car shopping still such a headache? KIRO 7 took these questions to supply chain expert Dr. Surya Pathak with the University of Washington Bothell. His teaching and research focus is on supply chain and operations. He’s also a self-proclaimed car enthusiast.
“I’m an avid car buyer,” said Pathak. “So I’m well-known in the dealership areas here,” he said.
He recaps why the market is in its current situation.
According to Pathak, when the pandemic struck and everything shut down, people stopped driving. So auto makers scaled back microchip orders. Instead, microchip manufactures instead produced them for the new demand — laptops for remote learning and work.
Then when the lockdown lifted, demand for cars came roaring back, but there was no microchip supply.
“To suddenly come back in 2022 to say there’s a tremendous demand, because it was pent up, now it’s very difficult to build up capacity instantaneously,” said Pathak.
Now, other factors are also contributing towards slowing the rebound of supply.
“Add to that there’s a war going on that started in February, and add to that rising global escalation and tension. It’s creating uncertainty both in the demand side and supply side,” said Pathak.
Pathak says the war in Ukraine is playing a particularly big role in the electric vehicle shortage.
“There are certain kinds of gases that come from Ukraine, and certain components with lithium ion batteries that come from Russia,” said Pathak. “It’s on the battery side of things more than anything else, EV shortages. It’s crazy, right?” he said.
Meanwhile, there’s another twist. As the new car inventory starts to improve, it means prices in the used car market are quickly plummeting.
Cash Thomas owns C&D Auto Sales in Kent. All of his inventory is pre-owned.
Thomas says about two months ago, he bought a Suburban at auction for $11,800, about $2,000 less than the Kelly Blue Book price, so he was set to make a small profit with the sale.
But as the car sat on his lot, the market started adjusting.
“From 60 days when I bought it to now, they’re saying the car is worth $5,500 dollars,” said Thomas.
“How can there be a swing like that?,” Sun asked.
“That’s the market,” Thomas said. He ended up selling it for about $9,000. “I’m a small dealer looking to make a profit and I’ve already lost $3,000 on the car,” said Thomas.
That can mean a better deal for you, the shopper.
“The used car market is decreasing and it had to. When they were inflated as much as they were the last two years, when they were selling more than new, they could go only one way — and that was down,” said Korum.
Puyallup Nissan says they’ve also lost money on some used vehicles purchased at the height of the used car price peak. Korum said one vehicle that came to mind was a conversion camper van that they’ve now had for at least six months.
“I’ll just say we’re asking around $50,000 and we’re losing a lot of money on that. It is new and has low miles,” said Korum.
All the fluctuations and uncertainty mean it’s a very tough time for people looking to buy a car.
“I’m kind of in a situation where I need something,” said Zimmer.
There are ways to make sure you get the best deal available.
From this reporter’s research, the biggest takeaway to save money is to call the dealership before you go.
There are also some important questions to make sure you ask:
- Do you sell above MSRP?
Look for a dealership that guarantees it won’t. For example Puyallup Nissan, Honda of Lynnwood and multiple other dealerships said they don’t sell above the manufacturer’s suggested retail price.
- Do you have the car I’m interested in on the lot?
It’s important to check in on a dealer’s inventory. Some may only have a few cars, so make sure the one you want to test drive is available — that can help you avoid a wasted trip.
- Are there low interest rate offers on certain models?
Interest rates are climbing, but some manufacturers are still offering low interest rates. These offers can change from month to month and a dealer will tell you what’s available. You can still find zero to 2% rates, but heads-up: typically you’ll get less time to pay off the loan — often two or three years instead of the usual five or six.
- What’s the expected wait time for ordering a new car?
Because of supply issues that vary from how high-tech your car is to where the manufacturer is located, wait times can vary dramatically depending on make and model.
The uncertainty has many people like Zimmer deciding to hold off buying that new or pre-owned car until things settle down.
Pathak believes when they do, possibly by the end of next year, car shopping will be different. That could include customers more willing to custom order and wait for a car, or accepting that there is no negotiation room.
“One thing I’m certain about, you are going to have a new normal. You are not going to go back to the old habits of buying a car,” said Pathak.
One final takeaway: if you’re looking to buy a used car, data from major car-auction company Manheim indicates that used car prices will keep falling.
So if you’re looking to buy a used car and can hold off until next year, that’s a good idea.
But if you want to buy a new car and trade in your current vehicle, you’ll get the most cash for your used car right now.
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