‘We just don’t have cars.’ Auto shortage means few choices, high prices for buyers

State Line Chrysler Dodge Jeep Ram used to get two to three truckloads of cars delivered each week.

Recently, said general manager R.L. Swanson, it’s been down to one delivery a month.

“Normally, you’d have a choice of 10 different cars in 10 different colors,” Swanson said. Now “it might be two different cars in one color.”

A similar story is happening across the country: There aren’t enough cars to meet demand. And with new cars in short supply, buyers are turning to used cars. But used car prices are soaring, too.

Compared to a year ago, there were 43% fewer new cars available in June, according to Kelley Blue Book. A lack of semiconductors, which are used to create computer chips that power many cars’ technological features, is driving the shortage. Newly made vehicles are sitting idle at manufacturing plants awaiting the final piece, including at the Ford and General Motors plants in Kansas City.

“We just don’t have cars,” Swanson said. “We’re trying to get them in.”

With fewer new cars on the market, more people are turning to used cars. The average age of cars on the road is at an all-time high of 12 years, according to data analysis site IHS Markit. It’s been trending upward for years but accelerated this year.

“New cars are down, and, in turn, the used car market’s really hot,” Swanson said, “because that’s what people can readily get their hands on.”

Increased demand means used cars are in short supply as well.

Summer is usually a popular time to buy a car, but this year, demand has also been driven by the pandemic. People who kept their jobs saved money they might have spent on vacations or events and now are ready to shop for a new car. Some people moved out of cities with the increase in remote work, necessitating new vehicles. And time stuck at home meant many reconsidered their assets.

“One thing we learned is cars symbolize access and freedom and adventure,” said Danny Zaslavsky, general manager at used car lot Country Hill Motors in Merriam. “COVID created a desire for folks to look within their walls and say, ‘Hey, I want to change my house,’ or, ‘I want to do stuff to my house,’ or, ‘I want to change my car,’ or, ‘I want to do stuff to my car.’”

A shortage of rental cars isn’t helping, either. In a typical year, rental car companies would feed their vehicles into the used-car market. But after selling most of their fleets when travel halted last year, companies are competing with customers to buy cars back.

Car prices increase

This scarcity of new cars has led to higher prices — for both new and used cars.

“So, as a consumer buying a new vehicle, no, you won’t have a whole lot of leverage to negotiate hard on the vehicle you’re buying,” said Bernard Swiecki, research director at the Center for Automotive Research.

New car prices increased an average of 5.6%, from $42,341 to $44,732. Many new cars are selling at sticker price, which Swiecki called “remarkable.”

The average price of a used car increased 13.9% — from $21,202 to $24,147 — between April 2020 and April 2021, according to data from the National Automobile Dealers Association.

These increases are not as significant as, say, home prices, Zaslavsky pointed out.

“It’s not like (consumers) are paying $10,000 more for a car than they did a year ago. That’s not the case,” Zaslavsky said. “You may pay a little bit more, but you’re not paying a whole lot more. It’s just harder to find, is the issue.”

However, for some, that little bit extra could price them out of the market, Swiecki said.

The prices also depend on the type of car. Manufacturers are prioritizing more popular models, which can be a double-edged sword: They may be easier to find, but popularity could also mean higher prices. Generally, trucks and SUVs are the most sought after; in Kansas City, the fastest-selling new car in May was the GMC Sierra 1500 pickup truck, according to a report by automotive research site iSeeCars.

In some cases, the price increase on used cars is so severe, people are spending the extra money to just buy a new car instead and swinging the pendulum the other way, said Todd Tumminia, owner of Tumminia Mazda.

“They can almost get a new one for not that much more, just a fraction more, and that does seem to make a little bit more sense,” he said.

What to consider when buying

Staying open-minded is the key to car shopping in this market. People who are focused on general needs — things like reliability and gas mileage — will have more options than people focused on more narrow wants — certain brands, model year or amenities.

“The more specific you get, that’s where that buyer should put on their ‘Inspector Gadget’ hat,” Zaslavsky said.

By that, he means those looking for something particular should do more research to figure out where a certain car is available and a plan to get it. Patience is also important, as there are longer wait times to get many models.

It may not be a great time to buy, but it’s certainly a great time to sell, with many cars going for more than their purchase price. Swiecki recommended shopping around before selling to get the best deal, instead of just trading in one car for another.

But if a new car isn’t a necessity, it could be more beneficial to wait for the market to correct itself.

“It depends on the urgency,” Swiecki said. “. . . You might save if you wait.”

The wait could be anywhere from six months to a year, or even longer. Swiecki said there’s no definitive answer as to when there will be enough chips to meet demand. General Motors announced last week that its Kansas City plant would remain closed until Aug. 16, past its initial expected reopening date in July.

Once the unfinished cars have chips and are sent to dealerships, though, they’ll flood the market and bring prices down with them.

“Eventually, when we’ve got this solved and all these vehicles are finished and they hit showrooms, they’re going to depress prices,” Swiecki said.