So what’s been going on with the auto market lately? Why has there been massive inflation in both new and used cars? A chip shortage is why. Semiconductors, or computer chips, are necessary in every new car. They tell the engine what to do, turn on and off the turn signals, radio, and headlights, and so much more. They are a necessity in the digital age for every new automobile.

Automakers across the globe are affected by this, not being able to produce existing cars or making them with limited features and release new cars. Toyota said “We are projecting a reduction of approximately 25,000 to 30,000 vehicles in February”. That’s a lot! Last year alone GM and Toyota missed out on 1.1 million sales, Volkswagen 1.15 million, and Ford missed out on the most at a whopping 1.25 million in sales. Ford announced the release of the new Bronco in July 2020 with orders planned to shipped out by late 2020 for the Bronco Sport and early 2021 for the full size Bronco, but that was delayed till mid to late 2021 for the Sport and the full size are just starting to appear on roadways now. This is mainly because of the chip shortage (the big one had some issues with the hardtop which delayed it further), this is a big issue for automakers and auto consumers.

On the consumer side prices are skyrocketing for cars both new and used. New cars are costing approximately $10,000 more than they were pre-pandemic with the average new car price being $47,000. Used car prices are of this world now, with a rise in price of 37%, which brings the average price to 29,000. Everything is inflating because of the shutdowns but for industries that require computer chips the shutdowns took one of the worst tolls because everything these days needs these chips. The supply of semiconductors is low but the demand is high, and until this starts to level prices will continue to rise. 

The prices of new and used automobiles are starting to exceed what the average American can afford. With cars exceeding MSRP (Manufacturer suggested retail price) by $10,000 on average, how can people looking to buy a cheap small car afford it when it’s the price of a small SUV now. First time car buyers are now struggling to purchase vehicles too with the used market being inflated by 37%. Take, for example, a used late 1990’s Chevrolet Suburban, a behemoth vehicle that you could usually buy for 5 or 6 thousand dollars, now can cost upwards of 10 grand even with 200k miles.

The auto market is obviously a mess now, so what does the future look like? Well it could get better or it could get worse depending on the source. There is a big shortage and it’s going to take a lot to remedy this in a timely manner. We need to increase production and build more factories so we can get back to normal. Hopefully after this there won’t be any more shortages, people will be able to buy products with computer chips for a fair, normal price.

Sources:

cnet.com, capitolfordsantafe.com, cbsnews.com, businessinsider.com, cargurus.com, bloomberg.com, fortune.com