Many states and car dealerships are seeing a new car inventory shortage. This is directly related to many manufacturers shutting down their operations in response to the COVID-19 pandemic. It is helpful to understand what the car inventory shortage means for you (the prospective buyer) and what options you have available to you during the pandemic.
The car inventory shortage explained
There are two major factors in the decline in car inventory among dealerships across the country. The first and most obvious is the coronavirus pandemic, which caused many car manufacturers in the United States and in other countries to shut down their operations temporarily.
In addition, huge incentives were given to prospective buyers to avoid an economic collapse of the automotive industry. Subsequently, the demand for new cars did not decrease substantially. This, of course, led to a significantly higher demand than what was being produced (the supply). As it stands now, this leaves many dealerships across the country with a shortage of new cars for prospective buyers to choose from.
An increase in used car prices
Used car prices are up as much as seven percent year over year from July 2019, in addition to more than a two percent rise in new car prices. This is due in large part to the demand for used cars during the COVID-19 pandemic. Fewer prospective buyers are willing and able to purchase a vehicle, and they are deciding on used cars.
In addition, and as discussed, the shortage in new car inventory is also affecting the prices of used cars. Quite simply, since the market is seeing fewer new cars, consumers desire used cars more. This increases the listing and sale price. Also, dealerships are adapting to having fewer new cars on their lot. They are shifting their marketing approach towards selling more used.
Types of cars that are the most limited
Essentially every kind of vehicle is in a more limited stock then it was at this point last year. However, some vehicles are more limited than others. Here is a breakdown of the availability of each vehicle type:
- Hybrids – The higher cot of hybrids combined with low gas prices has limited the demand for hybrids. There are plenty to choose from, and they are probably the type of vehicle the car inventory shortage affects least.
- Minivans – In general, minivan inventory is relatively scarce. However, some minivans such as the Kia Sedona are replenishing rapidly.
- Sedans – The more common sedans such as Toyota Camry and Nissan Altima are limited, which may raise the used car prices for them. However, sedans are still widely available at most car dealerships.
- Sports Cars – There has been a fairly low demand for sports cars in 2020, which means they are less affected by the car inventory shortage.
- SUVs – Most SUVs such as the Toyota RAV4 and Honda CR-V are down in inventory, but they are still relatively easy to find. Used SUVs may be slightly more expensive than normal.
- Trucks – Pickup trucks such as the Ford Ranger, Toyota Tacoma and Chevy Colorado are scarce, although manufacturers are seeking to replenish them as quickly as possible.
Of course, every dealership will have a different level of availability and prices for their new and used cars. Most notably the city and state you live in (see below) play a major role in the severity of the car inventory shortage.
Areas where new car shortages are the worst
In general, COVID-19 hot spots are experiencing a more severe car inventory shortage than other areas. Also, some states have more restrictive mandates and regulations due to coronavirus, which may also limit the ability of car manufacturers and dealerships to operate.
As discussed, trucks and minivans are more limited during the COVID-19 pandemic. The shortage affects states in which these vehicle types are more common more than other areas. For example, pickup trucks in rural areas of Texas may be harder to come by.
Options that are available to prospective car buyers
Due to the nationwide car inventory shortage , those interested in purchasing a new vehicle should consider all available options. Of course, there are options available to prospective buyers. You can purchase a new vehicle despite the inventory shortage and increased cost. But you can also buy a used vehicle or fix up your current one.
When deciding which option is best, consider how often you intend to drive. More people are driving less in 2020. If this applies to you, simply fix your current vehicle to make it safe and comfortable for short distances. Otherwise, you can purchase a new or used vehicle, as long as you understand the costs associated with doing so. If you do purchase a car, you can help your chances of finding a good deal by looking online. You can also call the dealership before visiting to ensure they have the car you want.
Our suggestion: keep your car during the pandemic
If your vehicle needs engine replacement or other expensive costs, you may need to buy a new or used vehicle. However, if your car still runs well or can be fixed for an affordable price, then we recommend keeping your vehicle until the car inventory shortage improves.
To ensure your car is in good condition, conduct a thorough inspection or have your mechanic do it for you. If any parts need replacement, such as dim headlights and loud brakes, then replace them promptly. The repair costs to fix up your current vehicle is almost always less expensive than purchasing a new or used vehicle, especially when there is a car inventory shortage.
The bottom line
The car inventory shortage means higher prices for new and used cars at many dealerships. You may also find limited availability for the vehicle of your choice. If you are considering purchasing a car in 2020, then consider all available options to determine the best choice. If your car runs well, then making minor improvements may be the most affordable and convenient option.