As demand for cars soared last year, the cost of cars rose even more. High semiconductor prices, inventory shortages, and shortages of labor have all conspired to push up prices. Moreover, labor shortages have slowed down production and contributed to a higher price. According to a report published in CNBC, eighty-nine percent of new-car buyers are paying above sticker price. As a result, consumers should expect higher prices for the rest of the year.
The rapid rise in car prices could soon end, but that doesn’t mean that they’ll return to pre-pandemic levels. In the U.S., a shortage of microchips has limited the production of new vehicles around the world, causing prices to rise even further. The result is that demand continues to outpace supply, despite the soaring prices. According to Edmunds, the average transaction price of a new car is now over $50k – an increase of 4.4 percent from last spring.
While automakers’ discounts have been cut, prices of new cars are still rising. Automakers don’t need big discounts to sell cars, because the supply of new vehicles is limited. Additionally, new vehicles don’t sit on dealer lots for long. In December, 57% of new cars sold within ten days of delivery. This means that new car prices are on the rise, but not at the pace they were a year ago.
While the price of used cars continues to rise, it is still lower than the price of a new car. But this isn’t necessarily bad news. The high cost of gasoline is making it more difficult for many people to buy a new car. And because people have become used to high car prices, many aren’t buying a new one. If this trend continues, it could lead to higher car prices in the future.
Used car prices have risen due to the shortage of new cars and a general increase in demand. The supply of new cars is expected to normalize in the fall, aided by the shortage of computer chips. Repossessions, fleet sales, and off-lease cars are also shrinking, reducing the supply of new cars. Despite these factors, used car prices are now higher than their MSRP, making them an increasingly valuable asset.
Recent data from Edmunds shows that average used car prices will continue to rise. The average used car price will hit $28,000 by the end of 2020, up 27% from a year ago. That is an incredible increase in price. Used cars were also hit by the high cost of microchips. The demand for chip production in the United States soared after the recession, causing many chip factories to close. The shortage could result in 8 million cars going unfinished.
