New or used car prices are rising as stocks decline this spring

It is a difficult time to be a car buyer.

The high consumer demand, together with the lack of production of microchips – key parts necessary for the operation of today’s cars – have gathered the inventory of new vehicles at dealerships across the country. And with drivers looking for affordable options to get on the road, the used car market doesn’t offer much improvement.

“It’s a sellers ‘market, not a buyers’ market,” Kelsey Mays, senior editor for business.com for Cars.com, said. “And sellers don’t have that much to sell.”

The average price paid for a new car is about $ 40,000, according to Edmunds.com. For used cars, it’s about $ 23,000.

One year ago, when pandemics and production plans were shut down due to the pandemic, chipmakers have pivoted to focus on the consumer electronics industry – computers and game consoles – and are still struggling to meet renewed demand from manufacturers of cars.

“The chip deficit is causing a lot of chaos,” said Ivan Drury, senior insights manager at Edmunds.com. “But these chips are essential for a car because it’s basically a rolling computer.”

Some manufacturers have produced new cars that are in their parking lots and are waiting for chips to arrive and be installed, Drury said.

“That’s what I can do to get the cars as close to completion as possible,” he said.

One result of the squeezed inventory is that fewer vehicles are available at lower costs. At Cars.com, listings for cars selling for less than $ 25,000 fell by about 19% in March-February. There is also only 38 days of inventory at dealerships, Mays said. This compares with the usual value of 65 to 70 days.

“What’s left on the dealer lots is a more expensive inventory,” Mays said.

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However, although the lack of chips is expected to have an impact on production by late summer or early autumn, not all car manufacturers – or specific models – have been equally affected.

“It might be a good time to explore other brands if you’re usually loyal to yourself,” Drury said. “There could be a vehicle with the same features, the same color … but it could just be a different brand.”

Although manufacturers’ incentives are not as abundant as in the past, there are some models that continue to be reduced. The average amount of incentives is $ 3,527, down from $ 4,415 in March 2020 and $ 3,789 in March 2019, according to estimates by JD Power and LMC Automotive.

Chevrolet, for example, is offering deals for the 2021 Equinox, which range from $ 3,500 to $ 6,500 for most versions through May 3, according to Cars.com. After the discount, the price would be between $ 21,000 and $ 38,000. The new Jeep Renegade comes with a factory discount from 2,000 to 6,000 dollars, setting the price you will pay between 20,000 and 33,000 dollars.

If you can get a discount from the manufacturer, don’t assume that there is no extra room to worry about the price.

“That [reduced price] it should be the starting point for negotiations, “Mays said.

In addition, the high demand for used cars means that your existing car can be more valuable. The average amount for a transaction is about $ 17,000, according to data from Edmunds. The average age of these cars is about 5.5 years.

“These exchange rates are pretty dramatic,” Drury said.

Whether you’re considering a new or owned car, it’s worth looking beyond the dealerships near your home, Drury said. The larger the search range, the more options you will have.

There are also other ways to reduce the cost of purchasing. Depending on your credit score, you may be able to find a 0% financing offer for a new car. Otherwise, the average interest rate paid on a new car loan is about 4.5%, according to Edmunds. For used cars, it is 8.1%.

Keep in mind that the longer you extend your loan – for example, for 72 or 84 months (six or seven years) – to allow you to pay monthly, the more you will pay in interest (unless it is 0%) and the higher the chance that you will end up trading it with a new car before paying for it.

And in this scenario, if the trading value is less than the amount owed on the loan, consumers could end up running that “negative capital” on the loan for their next car.