Car buyers face skyrocketing prices and few choices as inflation and supply shortages choke inventory

After two years of pandemic life, Americans are getting used to strange times — and that’s trickling down to auto purchases.

Visit any car dealership and for many days the empty spaces where vehicles once stood reflect factory closures, delivery issues and shortages of computer chips caused by the pandemic. Vehicles are harder to find as consumer demand is constant.

Vehicle inventory in March 2022 stood at a third fewer vehicles on dealer lots than the 1.4 million seen a year earlier, according to JD Power. Customers decided to order cars without seeing them, buy cars that weren’t exactly what they wanted, and often pay the list price.

“We get assigned vehicles probably about 60% to 65% of what we normally get,” said Jeff Glanzmann, general manager of Glanzmann Subaru in Willow Grove for 14 years. “Our lot in terms of new car inventory is definitely not near where it should be. We may have five or six new cars in the field at some point, whereas before the pandemic, we could have had close to 200.”

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Other dealerships tell a similar story.

At Pacifico Ford, Mazda and Hyundai in Southwest Philadelphia, inventory varies from day to day. Maria Pacifico, president of the dealership, said the vehicles leave soon after they arrive, with about half of them made to order.

“We’re probably pre-selling 50% to 60% of the inventory,” Pacifico said.

Lower Gwynedd’s Clint Ehlers could be a unicorn in these tough times: he got what he wanted for a fair price, without a huge expectation.

About six weeks ago, Ehlers spotted a 2022 Subaru Outback Wilderness at Glanzmann in the color he wanted — blue — but it was already sold. When he returned about a month later, he found another blue one, but it was Glanzmann’s demo vehicle. So Ehlers ordered a vehicle and waited two weeks for delivery from the dealership.

“They’re like all dealerships: they order a bunch of cars, but they’re all sold out by the time they hit the field,” said the 57-year-old graphic sign franchise owner.

A regular car shopper who said “I hate going to dealerships,” Ehlers did the kind of homework he usually does when buying a car and found he was getting the best deal on the car. ‘era.

“I bought them,” he said with a laugh.

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Trends show that new car prices are on the rise. The all-cars website Edmunds.com figures showed the average price of a new car in March was $45,120, or $677 more than the average list price.

Ford was one of the manufacturers that pressured dealers not to sell above the list price, Pacifico said, a price she said her dealer had always considered the limit.

In an email, Ford representatives shared an Edmunds report which ranks automakers based on average transaction prices above list price. In January, around 82% of buyers paid above list price, compared to just 2.8% in January 2021. According to the ranking, Cadillac, Kia and Land Rover saw the largest average increase over list price, while Alfa Romeo, Volvo, and Lincoln had the most modest increases. Ford ranked 26th out of 33 companies surveyed, with an average increase from list price of just $163.

Consumers may start to see changes in vehicles in stock and what they can order.

“Ford conveys that if you don’t order certain options, your vehicle will be built faster,” Pacifico said. Ford did not respond to a request for comment.

Toyota’s sales team said in an email that vehicle production at its North American plants has been affected by supply chain disruptions and the availability of some premium features may be limited.

The lack of selection and negotiation means that some potential buyers walk away.

Havertown’s Richard Chaitt thought it was time to shop for a new Subaru with his wife, Shelley. But they gave up the search and will continue to drive their 2008 Chevrolet Impala for now.

“If you have to have a car, you’re between a rock and a hard place,” Chaitt, 75, said.

What can help to change the difficult buying situation? In the broader economy, the Federal Reserve is turning to interest rate increases to curb inflation, though these moves will also make it more expensive to borrow money to buy a car.

Automakers advertise low rates for new car loans because they are able to subsidize such loans, said Jessica Caldwell, executive director of Edmunds. But as rates rise, it could be the deathblow for consumers.

“So I’m being asked to pay a higher price for a vehicle that isn’t necessarily my perfect vehicle, higher interest rates and now higher gas prices are making the market quite hostile for many consumers,” Caldwell said. “So I think people walk away, and they just say, ‘I’m just going to wait; there’s just too much against me.

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No one knows how long this lasts. Factory closures in the West are infrequent these days, but China remains on a zero COVID policy, and that could have global effects.

Caldwell is reluctant to speculate, but cites what she’s heard from manufacturers and dealers that supply and demand are unlikely to realign until 2023, at the earliest.

And even then, buying cars won’t be easy, with spotty inventory, factory start-up stops and continued strong demand from consumers like Chaitt waiting these days.

“It makes me believe that the recovery process will not be linear or fluid; it’s going to be up and down,” Caldwell said.

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