A shortage of chips has had a profound impact on the ability to buy a car. Supply chain issues have forced automakers to halt or limit production of new cars, trucks and SUVs. With the disruptions due to the coronavirus pandemic, the price you pay and the deal you get could be very different from what you expected.
We’ll cover what’s causing the chip shortage, how long it could last, and what it means for new-car buyers. This page will be updated as new information becomes available, so make this your starting point for key insights that will help you better understand market conditions and, most importantly, how to get the best deal. .
Why is there a shortage of chips? Automakers canceled semiconductor orders early in the coronavirus pandemic. Once the economy began to improve rapidly, access to these materials proved extremely difficult as they were already earmarked for consumer electronics by chip vendors.
When will the chip shortage end? Analysts predict that inventories may not return to pre-pandemic levels until 2023. Many chip vendors are located overseas, and it hasn’t been easy for the United States to build more semi- national drivers. Although the government is making efforts to make this happen, it will take time.
Some manufacturers took the opportunity to make big changes. For example, Ford limits the number of vehicle configurations stocked by dealerships by up to 80%, which may encourage more buyers to place an order. Honda is looking to normalize lower inventory levels to reduce overhead and boost profits for its dealers.
What does the shortage of chips mean? With inventory shortages making it harder to find vehicles, new car prices remain high and buyers have less bargaining power than in the past. While there may be ways to avoid a dealer markup, some buyers have decided to order cars in transit or even delay their purchase.
Dealerships may be selling fewer cars, but also making record profits. A shortage of new cars has also boosted demand for used vehicles. This has driven used car prices up by more than 40%, creating opportunities for some buyers to benefit from high trade-in values. Some brands have started limiting lease buyout options as a result.
Without the required semiconductors, automakers were unable to complete manufacturing of their cars. For example, GM limited the availability of its Super Cruise driver-assist technology and even began selling incomplete vehicles with a number of missing features that would have been standard equipment.
In the photo above taken from a 2022 Chevy Tahoe High Country window sticker, you can see that the automaker is crediting buyers a total of $100 because the $80,000 SUV was not built with an engine with automatic stop/start and does not have a steering column lock. Failure to stop/start could adversely affect the driver’s fuel economy for years.
Here are some other notable examples of the impact of the chip shortage on cars:
What are car prices like during the chip shortage? According to data from Kelley Blue Book, consumers have been paying more than MSRP for more than 6 consecutive months. While the figure doesn’t take into account manufacturer rebates, it does indicate that new-car buyers should expect to pay MSRP or more until conditions improve.
The average transaction price for a new car in December 2021 was over $47,000. New vehicle prices were already trending higher due to a shift towards expensive SUVs and trucks, but the chip shortage only made matters worse. While there are still cheap cars you can buy in 2022, there are definitely fewer choices.
Paying the MSRP might make sense if you can’t wait. After all, real car prices are dictated by supply and demand. Although manufacturer incentives are down overall, there may still be opportunities to save, whether with great lease deals or 0% finance promotions available amid the inventory shortage.
Which cars are the hardest to find during the chip shortage? Imported brands are the hardest to find. According to Cox Automotive, Kia and Honda tied at the end of last year with the worst inventory at 17 days’ supply. The industry average was 33 days. Toyota and Subaru were not far behind with 19 and 20 day supply, respectively.
That said, brands with higher days supply aren’t always easier to find. For example, GM has more inventory than Toyota, but trucks like the GMC Sierra come in many different configurations. Therefore, to get the exact truck you want, you may have to wait or place an order with a dealership.
Which cars are the easiest to find during the chip shortage? Based on days supply, Chrysler had the most inventory at 98 days based on data from the end of last year. However, given that the brand only sells two main models at this point – the Chrysler 300 and Pacifica minivan – those might not be so easy to find.
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