The ability to purchase a car has been severely affected by a shortage of chips. Automakers have had to limit or stop production of new cars, trucks and SUVs due to supply chain issues. In addition to disruptions caused by the pandemic, your car’s price and deal could differ from what you expected.
We will discuss the reasons for the shortage of chips, the time it might last, and the implications for car buyers. This page will be updated with new information as it becomes available. Make this your home base to learn more about market conditions and how you can get the best deal.
What is the Car Chip Shortage?
In the initial stages of the coronavirus epidemic, auto manufacturers cancelled semiconductor orders. After the economy began to recover, it became extremely difficult to access those materials as they were already assigned to consumer electronics by foreign chip suppliers.
When will the car chip shortage end?
Analysts believe that inventory will not be back to pre-pandemic levels before 2023. It is difficult for the United States to produce more semiconductors in America because many chip suppliers are located overseas. Although the government is making efforts to make this happen, it will take some time.
The U.S. Commerce Department reported earlier this year that the median supply of semiconductor chips was now just 5 days, down from 40 days prior to the pandemic. Major semiconductor companies stated that they don’t anticipate the situation changing in the next six months.
In February, Toyota announced that it would reduce production by as much as 200,000 units globally because of supply chain problems. This could affect models such as the Lexus NX and Toyota CHR. Another disruption was a Canadian trucker protest, and an earthquake in Japan.
Manufacturers have made significant changes to their products. For example, Ford is limiting the number of car configurations stocked by dealers by up to 80%, which may get more buyers to normalize lower inventory levels to reduce overhead and increase dealer profit.
There have been some improvements in the number of new cars over the last year. Prices remain high at historical highs. According to Automotive News industry news publication, both GM & Ford anticipate clearing their backlogs by 2022. This will allow them to sell more cars.
What does a Chip Shortage mean?
The inventory shortfall has made it difficult to find cars , and buyers have less bargaining power. There are ways to avoid dealer markup. However, some buyers have taken to ordering cars in transit and even delaying the purchase.
Although dealers may be selling less cars, they are still making record profits. Preowned cars were also in demand due to a shortage of new cars. This resulted in used car prices rising by more than 40%. Some buyers were able to take advantage of high trade values. As a result, some brands have begun restricting lease buyout options.
Automakers were unable to manufacture their cars without the required semiconductors. GM, for example, limited availability of Super Cruise driver assistance technology. They also sold vehicles that were incomplete with a few missing features that would have been standard equipment.
High Country window stickers shows that the automaker credits buyers $100. This is because the SUV, which cost $80,000 to build, doesn’t have an engine with automatic start/stop and a steering column lock. A driver could lose years of fuel economy if they don’t have stop/start.
Ford has confirmed that it will begin selling unfinished vehicles as long as they are safe to drive. The affected vehicles will have certain chips missing that dealers will need to install later. According to Automotive News, nearly 1.2 million vehicles were removed from production globally.
These are just a few other examples of how the problem with the chip shortage has affected certain cars.
- Some Genesis models have lost driver-assist safety functions
- Ford started selling driveable cars with no chips
- Tesla increased prices by as much as $10,000 in March 2022
- Ford added a surcharge for raw materials to some fleet vehicles
- Ford Mustang Mach E orders were delayed
- Toyota Tacomas were first equipped with a single keyless remote
- Buick Encores introduced the entry-level 1.2L engine
- Ford sold thousands of F-150s equipped with missing chips
- Ford offered to eliminate stop-start on F150s in order to speed up delivery
- GM stopped building Silverado trucks using cylinder activation
- Toyota has stopped leasing advertising in certain regions
What are Car Prices Like During A Chip Shortage?
According to Kelley Blue Book data, new car buyers have been paying more than MSRP for months. While the figure does not factor in factory rebate deals, it does indicate that new car buyers should expect that they will pay MSRP or more until conditions improve.
In October 2022, the average transaction price for a new car is $45,599 per J.D. Power. Monthly payments will reach $711. The monthly payment will be $711.
There are still affordable cars that you can purchase in 2022. However, there are fewer options. If you can’t wait, paying MSRP might make sense. Real-world car prices are determined by supply and demand. Even though manufacturer incentives have fallen overall, there are still savings to be made.