Microchip Shortage Sends Used Car Prices Soaring, Causes Headaches for Dealerships

As consumers have no doubt noticed, there is a shortage of new and used cars in the United States, and manufacturers and dealerships are scrambling to cope as prices continue to surge on the suddenly-scarce vehicles.

The scarcity has two primary sources: Americans are looking to get out and about after a year of being largely stationary because of the coronavirus pandemic, and a massive shortage of microchips used in the manufacturing of cars has suddenly made new cars scarce, and used cars extremely valuable.

“In reality, we normally have cars in the back stacked up and ready to go, and now it’s looking pretty bare once you get on the lot,” Danny Haggerty, new car sales manager at Haggerty Buick-GMC, says.

According to the US Bureau of Labor Statistics, used-car prices have jumped 21% since April 2020. In that same time period, new car prices have risen by just 2%, according to the bureau.

The increase in demand has surged even more for used trucks and SUV’s, according to experts.

“If you have a truck sitting in your driveway that you’re not using that much, and you can afford to get rid of it for a little while before replacing it, then it’s a great time to sell a truck,” Carfax expert Emilie Voss says. “Truck retail prices are up 44% compared to what they were the same time last year.”

Some car dealerships have even resorted to cold-calling customers and inquiring about purchasing their used vehicles, aiming to boost inventory and increase sales on their lots.

Voss points to several reasons for the increased demand in used cars.

“Lifestyles have changed (because of the pandemic),” she says. “People are maybe moving to the suburbs and out of the city, and they are finding that they need a car. That’s where we think we’ve seen the increase in demand for some of those cars that are maybe $10,000 or under.”

Manufacturers are trying to get creative to solve issues surrounding the shortage of microchips, and dealerships are hoping that production will ramp up enough to help stabilize the car market by the fall.

“I know, at least for General Motors, they are building vehicles and simply waiting for the chips to be put in so they can get them to dealers,” Haggerty said. “So fingers crossed, I would say by the fall or maybe the winter we could have a more normal market.”

Lawmakers are also hoping to help. Sen. Dick Durbin is pushing legislation in the Senate that would invest billions in domestic microchip production to help make up for the lack of overseas shipments.

“We think we can be self-sufficient in chips, have production to keep things developing and products coming off the line and people coming to work,” he said. “I think we can win this battle.”

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