How Long Will Current Car Shortages Last?
Jane Lu
· 3 min read
You might have been trying to
buy a new car
, but realized that the prices were soaring or the vehicle you want is out of stock. Car demand has been heavily outweighing supply according to
CNBC
reports. When a new supply comes, about 75% of it is already sold.
Buying a
used car
or looking into trade-ins can be a good way to save money. How does unmet demand help car companies boost profits and what can you do to save costs?
What is causing the shortage of new vehicles?
A 60-day supply is considered healthy in the auto industry. At the end of April, full-size pickup trucks had an average inventory of 48 days’ supply.
In another report,
CNBC
talks about how chip shortages have caused companies like Ford to have lower vehicle inventories and higher pricing. Semiconductor chips are used to provide power to systems in new vehicles like driver assistance and in-car entertainment.
However, even with shortages, Ford had impressive earnings in the first quarter of nearly $3 billion in North America. It’s hard to say whether the imbalance of demand and supply will actually reduce company profits in the future.
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How long should I wait before buying a new car?
Sonic Automotive President Jeff Dyke told CNBC that auto companies are making a lot more money and he doesn’t see things going back to pre-pandemic levels. Ford believes that the chip shortages will improve halfway through the year but will still impact 2022.
It seems unclear when exactly you’ll see supply be more aligned with demand. However, waiting for the supply to be closer to the healthy 60-day mark might be a good first step. Keep a look-out for reports about car supply and try not to rush into buying a new car.
How do shortages help companies profit?
Since Ford is expecting to lose about 1 million units this year because of chip shortage, investors are hoping they continue to provide low inventory to help with profits.
Jim Farley, the CEO of Ford Motor, says that the company will run with lower supply because it’s good for the company and for consumers. But for now, Ford and other companies like General Motors seem to be benefitting from the shortage. Less companies are offering incentives and discounts for buying vehicles from their brand.
2021 isn’t the first time where you see the supply of new vehicles being unable to meet demand. For years automakers have tried to boost profits by making inventory more scarce, according to CNBC. This is actually quite difficult, but the demand has been stronger than expected throughout the pandemic.
Other options for buying a car
Customers are looking into used cars or trading in vehicles for higher prices. Used car prices have also increased since it’s one of the first things you think of if a new car is too costly. Be sure to shop around and see if any dealers are offering better prices for your trade-in.
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