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  • Writer's pictureMaestro Associates

A red hot market, but it isn’t housing.

We are all used to heading down to the car dealership, finding the car we want, and driving home on the same day. If you have driven by a dealership lately you may have noticed there are far fewer cars than usual on the lot. We are experiencing unprecedented times in the auto industry with a supply/demand imbalance that can benefit a patient buyer.

Here are some tips on navigating this market in 2021:

Sell your car

According to an article published by KBB, nationwide total used-vehicle sales were up 117 percent over March 2020 when COVID-19 shutdowns were at their peak. This rapid increase is creating unbelievably low supply. Basic economics tells you that when supply is low, prices are high and that is definitely true in the used car market. Because there is an overall shortage, car retailers are seeing higher prices on both the purchasing and list prices.

“Not only are there less cars at the auto auction, but other dealers are purchasing them at a price that I would list them for sale at” said Josh Letsis, Managing Partner, Medved Autoplex. He continued, “we are paying more for a trade-in than ever before because we know that we can turn around and sell those cars quickly with the current demand in the used car market.”

With low inventory and high prices now is the time to move out of your current vehicle and into something else. But into what? The challenge is no longer finding the exact used car you want, it’s finding one at all.

Look at a new car before a used car

Typically, the advantage to buying used is that you have let someone else pay for a majority of the depreciation and you can still get into a car with a lot of life left. Not in this market. With thin used car inventory, used car prices are at an all time high. In a number of models, like SUV’s, family cars, and trucks, the price for a vehicle that is 1-2 years old with 15,000 - 30,000 miles is close to the cost of a new vehicle.

At Maestro Associates, we’re seeing clients who are weighing the options of what to buy. In this market, you can get your ideal model and feature package, with no mileage, with what looks like more value over the next 4-6 years. And hey, as a bonus, it’s always good to know you are the first one to fart in the seat.

Did you know that all new cars must display an MSRP (Manufacturer Suggested Retail Price)? This is a Federally mandated consumer protection law that helps ensure retailers can’t manipulate pricing. Further, manufacturers are providing large incentives, this all means you are getting into a new car at a very aggressive predetermined fair market value.

Wait for what you want

While this is a great opportunity to purchase new, the only challenge with a new car is finding one of those too. Manufacturers are struggling to keep up with new car demand. One challenge is that cars are increasingly more reliant on computer parts, and due to COVID-19, the global microchip shortage has slowed or stopped production at manufacturers like General Motors, Ford, Toyota, and Honda.

Building on that, it appears manufacturers smell blood in the water and are actually increasing new car incentives in an attempt to steal market share from their competitors. These market factors have created a pinch on inventory for dealers, pushing the new car marketing and further fueling an already hot used car market.

When purchasing a new car you can be more selective, usually a dealer can get you exactly what you want, even if it isn’t on the lot today. Letsis says that “the manufacturer slow downs are going to continue to put pressure on the new and used car markets through the summer and likely into fall. We are finding vehicles for all of our customers, but this is one of the most difficult markets I have experienced in my entire career.” He continued, “If I had to offer advice to a new customer it would be to not be afraid, new or used, to go out of state to find the new vehicle. We have all gotten used to buying cars online and reputable dealers are good at finding you exactly what you want.”

With car manufacturers hungry for market share and retailers feeling the pain of low inventory, the consumer definitely has a big advantage in the shopping experience. By understanding what you are looking for, knowing the fair and reasonable price, and with a little bit of patience now can be a great time to move into a new car.

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