The price of a brand-new car is at a historical high and beyond most people’s means. According to Kelly Blue Book, CNET reports that the average cost of a new vehicle breached the $45,000 mark for the first time. In September this year, it was at $45,031. That is a $42,000 increase in just one quarter from June. Understandably, sales decreased by 7.3 percent from August as most people backed off from making a purchase. Interestingly, sales of luxury cars increased, showing that the ultra-rich have enough to afford the average price of a new luxury car at $60,845.
Kelley Blue Book explains that the steep price increase is still due to the shortage of microchips worldwide. The global spread of COVID-19 Delta has disrupted the recovery of microchip production. With meager availability, whatever microchips automobile manufacturers go into the most profitable high-end models. This further tightens the supply of mid-range to the more affordable models and pushes their prices upwards, as well.
Automobile dealers are profiting from the situation. AutoNation, the country’s largest new car dealer, reported a $361.7 million profit for the year this month. This is almost twice its $182.6 million net income from the previous year. Mike Jackson, the company CEO, stated that they are preselling vehicles still scheduled for production. For each new car, the company is earning a gross profit of $5,484. This is $2,949 more than the previous year.
Stay With Old Faithful
If your current vehicle is in good running condition, the best option is to hold on to it and wait until the prices of new cars become more reasonable. Now is the time to pay attention to preventive maintenance to ensure that your ride gets a longer life.
In addition to getting regular tune-ups, give your vehicle a professional paint job. Afterward, take it to an auto detailing service for a ceramic coating or paint protection film. Have the windows tinted to protect the interior from fading due to ultraviolet (UV) rays and to lower the load on your air conditioning system in the summer. Taking good care of your car will also give it a good resale value eventually.
Trade-in for a Used Car
You can also trade in your current car for a newer used model. This is better than trading it in for a new car. The top reason against buying a new car is that it depreciates by nine to 11 percent just as you drive it out of the dealer’s lot. In one year, it will lose about 20 percent of its original price. It is much wiser to buy a slightly used car for much less.
Used cars have also become very expensive these days, though. According to iSeeCars, used car prices had a year-on-year increase of 32.7 percent in June, 31.6 percent in July, and 26.2 percent in August, or $6,454 more than in August 2020. Data from Cox Automotive shows that prices increased by 5.3 percent from August to September this year and by 27 percent from September last year.
The state with the highest annual increase in used car prices is Alaska at 46.2 percent or $13,278. Hawaii follows it at 39.4 percent or $8,940, Utah at 32.7 percent or $7,586, Louisiana at 32.5 percent or $7,939, and Iowa at 31.7 percent or $7,763. The state with the lowest annual increase in used car prices is New York at 18.1 percent or $4,470. It is still a steep increase.
This is a domino effect from the price increase in new cars. People who could not afford to buy new turned to used cars instead of depleting supplies. Now, the few available used cars are already the more expensive, more recent models. This is not bad because it means getting a good vehicle but only if you can afford it.
The advantage of the high price of used cars is that your current vehicle will also get a reasonable price if you trade it in or sell it. Make sure to research various reliable sites online to determine the going rate for your vehicle.
Even if the used car you intend to purchase is slightly used and a relatively new model, never skip having a pre-purchase inspection done by an auto mechanic you can trust. This will ensure that there are no undisclosed problems with the vehicle. You will be paying between $100 to $300, but this is a worthy investment compared to the huge expenses you will face if you buy a problematic vehicle.
If you decide to go for a used car, do it now. According to various sources, prices of used vehicles are expected to continue to increase well into 2022, as do the prices of new cars. Automobile manufacturers are not likely to be able to meet the demand soon enough.