IS RIGHT NOW A GOOD TIME TO PURCHASE OR LEASE?

No two car deals are the same. 

Just because your neighbor came home with that shiny new car, or the local news said it’s an excellent time to buy a new vehicle, DOES NOT necessarily mean it’s the right time for you. However, on the other side, the message in the media might say that you should not get a new car, which they have been saying for the past 12-18 months. So it might be a perfect time to get a vehicle, depending on YOUR current situation. 

I have seen excellent decisions over the past year and some awful choices. I will not tell you what to do, only offer my perspective on whether you should consider whether it’s a good time for your situation. I have learned over the years that once we want something or have made up our minds as consumers, we seek out only the information that helps us justify the decision we want, not always the one we should make. 

 

Covid, computer chips, and labor shortages = no inventory

When the world shut down, it created a title wave of problems that hit the automotive industry hard. As you can imagine building a vehicle, it takes thousands of parts. These parts come from hundreds, if not thousands, of suppliers that make parts to be assembled by the end automaker. So fewer products will be produced if you can’t get all the parts and can’t find enough employees to build the products. This was like a title wave for the entire industry—every brand fighting to get their share of what they needed to make as much as possible. So now you are thinking, that’s nothing new we knew all of that JB. So everything was hard to get! 

Yes, and what happened to the price of just about everything? It went up! 

LESS INVENTORY + NORMAL DEMAND = HIGHER $$

Now we still would have had a problem with average demand, but since we shut down and did not do much for several months, demand was higher.  Then as life started to return to normal, we all started living our lives again and tried to return to everyday life as fast as we could.  

LESS INVENTORY + HIGH DEMAND = MUCH HIGHER $$$$

Stop paying over MSRP already

Car dealers are no different than other retail industries or businesses in general. So if you only have X number to sell, you will sell what inventory you can get at a higher price. 

Dealers could only get a fraction of the inventory they used to sell during any given month or year. How much less, most dealers saw 25% of what they used to see in any given month. This compounded as dealers did when they saw the next truck or how long became cars would come in. Thus the start of additional mark-ups began. 

Right or wrong, this happened in the car industry and many industries. Now, this is where I am not going to get into a debate about the past, but say we were one of the dealers that made a decision NOT to add any additional markup to our new vehicles. Whether or not it was the correct business decision, we know it was the right thing to do for our customers. 

Now I ask you to STOP PAYING OVER MSRP!  

Here’s the thing, inventories will come back! Automakers WILL be able to produce enough vehicles to meet the market’s demand, period! How long will it take? Nobody can give you that answer, but it’s happening now. 

Dealers are already starting to see more inventory, and depending on the brand and demand, they are now beginning to offer discounts to move available cars sitting on the ground.  

More inventory = More Incentives 

The age-old truth of the car industry, the more inventory that is sitting on dealer lots that are not sold, the more incentives the manufacturer (brand) will offer to move that inventory for you to buy it. 

We are seeing incentive offers come back with most, if not all, brands. 

To sum it up, if you are shopping now, you should NOT pay more than MSRP (Manufacture Suggested Retail Price) and even might be able to get a discount along with some kind of rebate or financing offer.  

But they are still asking me to pay more than MSRP.

Dealers are still trying to hand on more profits! Just like the dealers, the manufacturers are trying to control the demand with less inventory; as explained in this article from Business Insider, “Shoppers shouldn’t always be fooled by low inventory” I’m sure this is still happening all over the country. Dealers are famous for living in the past, and they will TRY  and convince you that everyone is still paying MSRP or even more. So my advice is DON’T, period!  No need to get mad; just walk away and find another dealer or dealer willing to work with you on the price. 

Somebody will sell it at a reasonable price, at least NOT over MSRP!  

Now I know you will tell me about that particular vehicle that no one is willing to make a deal on, and yes, there will always be a hand full of high-demand cars that nobody will discount, or not very much. So I can only offer advice if you have to have it, then either wait (they all get discounted eventually), or if you need only that one now, just pay the price. 

What about used cars? 

Yes, the used car market was like the wild, wild West!

You probably have seen the headlines and maybe even the crazy stories about the price of used vehicles. Many factors contributed to the massive rise in prices. It goes back to the same when there were no new vehicles for people to buy. So if you wanted or needed a car, many customers turned to the used market to find something.  This resulted in fewer used cars available, compounded even more by a shortage of trades. 

NO NEW VEHICLES = NO TRADES = HIGHER PRICES FOR AVAILABLE USED CARS

In 2022 the prices of used cars surpassed what they were sold for as new cars! Incredible, a two or 3-year-old car with 20,000 or even 30,000 miles selling for more than it was new. Now the first finger we want to point is at the dealer, which was the case as the supply of used inventory started to dry up. Dealers were getting every penny they could. Now also keep in mind it was the same problem as new. You didn’t know when you could get another vehicle to replace the one you sold. 

But, as the market caught on to the massive shortage of cars, customers wanted and expected those higher values for their trade-in. So if the dealer wanted to get the vehicle, they had to pay more or market value; thus, the prices stayed at record levels. In short, it will turn out to be one the craziest time we will ever see in the auto market in our lifetime, short another major world event. 

However, this is where most of the current opportunity is for many people considering getting a new vehicle. 

Check out the link below that best describes your next purchase to get the most accurate look at the car market.