Buying a brand-new car is not as easy as it was a few years ago. The pandemic-induced issues and the ongoing chip supply shortage are causing a big blow to the new car market. These events deeply affected the auto industry, but have surprisingly led to an increase in the used car market.
So, should you buy a car now while the used car market is hot? This article can help you decide if you should jump into purchasing a secondhand vehicle or wait for a better time.
Extremely high car prices
If you’re in the market to search for a nice car to purchase, then you should buckle up and get ready. According to the latest consumer-price index, car prices continue to skyrocket.
Manufacturers are selling their new car models for higher and higher prices. The supply of brand-new vehicles is limited, which means their prices will not start to decrease anytime soon. Even though the auto industry is facing some problems, many automakers are still choosing their newly produced vehicles at ridiculous prices.
Because of this, many people are swarming the used car market. Only a tiny percentage of buyers have the money to splurge on brand new vehicles these days causing the used car market to be a popular car-buying option right now for the general public. Both used and new car prices are hitting some record highs and some rates for used cars have even increased by 30 percent.
Currently, the market value of good second hand cars averages 20 percent. The price increase in both used and new car markets makes it harder to find a good deal.
Outrageous prices of brand-new cars
Aside from the chip supply shortage, vehicle manufacturers are also facing other pandemic-related problems. The coronavirus outbreak continues with more resistant mutated versions of the virus. Since people are still getting infected, the COVID-positive and close contacts need to quarantine or isolate to prevent the transmission of the virus.
Automakers changed their work set up to adapt to unexpected mishaps and the current public health situation. Last year, manufacturers were required to reduce their workforce and implement a skeletal work setup. Some automakers cut the production hours, while others resorted to suspension or closure of production and assembly plants.
On top of this, the severe winter that happened earlier this year affected some manufacturing plants in Detroit and other parts of the central U.S. Some plants also have a low supply of significant materials such as semiconductors, petrochemicals, and plastic components. These materials are essential in building exterior and interior truck accessories, electrical parts for the vehicles, and other automotive components.
Another problem that affects the auto industry is the shortage of rubber supplies. The prices of rubber materials are increasing, which is terrible for vehicle production. Although manufacturers can still use synthetic for many tire products, natural rubber is still the best material for tires. The demand for wheels and tires continues, but without the rubber stockpiles in the United States, it could lead to more significant problems for the years to come.
Only the consumers who can afford to buy new cars can reserve or pre-order their desired car models. Manufacturers can only produce a limited supply of specific vehicle models. Those who have placed custom orders must have a lot of patience.
Disadvantages of buying brand new vehicles
Automakers build newer cars with more advanced technology, and they have better improvements. They are more fuel-efficient and made with different safety features. Unlike older cars with airbags only, modern cars have stability control, lane assist, and more. They have life-saving features that are helpful in the event of an emergency.
On the downside, modern cars tend to break down due to faulty electrical parts. They are unlike some 90s vehicles made with more simple mechanisms. It is far easier to fix these older cars even when your car breaks down on the side of the road.
Linked new and used car markets
The used car market is greater than the new car market in quantity, but they are connected somehow. The brand-new and used vehicle markets operate back-to-back. The supply of used cars generally comes from the sector selling newly produced vehicles.
Nowadays, people buying brand-new cars have substantially declined. When the new car market took a big hit, the used car market was also affected. Fewer and fewer car owners are ending their auto lease or trading in their cars.
Choosing a used vehicle
If you aren’t able to get a great deal with the pre-owned car you just bought, you might end up resenting it. Even worse, it might cause stress and financial troubles if it suddenly breaks down and you’re not aware of the car’s problem.
Buying a car is not only about the actual money you spend on a car, but also about your peace of mind —knowing that the car you just bought isn’t going to break down or overheat when you’re stuck in traffic.
It’s important to learn how to shop for a pre-owned vehicle that is in excellent condition. Before you search the market for a secondhand car, learn about common mistakes you should avoid.
Some vehicles still hold their value well, even if they are a few years old. Our friends at CarInsurance.org created a detailed article on 10 Popular Cars Worth More Used Than New. Check out their blog to learn what cars are worth buying and if auto insurance covers them.
Check your budget
Whether you want to purchase a used or brand-new car, your budget is one of the most important things to consider. Assess your financial capability to see if you have the budget for a new vehicle or if you should stick with a secondhand car.
Buying a secondhand vehicle does not mean you’re cheap. If you need a replacement car, you should think of a used car as a wise investment. Since the prices of new cars tend to climb with the rising inflation, buying a used car is a great alternative.
You can still buy a car without going through financing or banks for people who have a low credit score. Many dealers in the used car market allow people to purchase in cash. It is also ideal to buy a used vehicle if you’re looking for low-down payments or low-cost installments.
Buying a used car is a brilliant choice for short-term use or if you just need a vehicle to use for commuting to and from work. But be aware, owning a used vehicle usually means you need to put some money aside for maintenance and services so that you can keep it in good running condition.
To buy or not?
Some experts predicted that the prices of used cars would fall slightly in the coming months. However, they might be wrong too because no one expected the used car market to climb steeply even in a pandemic. If you do not grab the chance to buy one now, you will have an even more challenging time looking for good cars with good deals in the future.
There’s nothing stopping you if you’re thinking of buying a new car. However, the answer may change to “no-go,” especially if the price of the car you want doesn’t fit within your budget.