Been on the lookout for a new ride? Before you rush to your next car purchase, it’s important to understand the current state of the automotive market to increase your chances of getting a good deal.
The Chip Shortage—and Why It Still Matters
Early in the pandemic, car sales plummeted because many people were staying home without a need to drive. In response to this drop in demand, automotive manufacturers slowed and even paused production. This meant they cancelled their own orders for semiconductor chips, which control many components in your vehicle.
During this hiatus, semiconductor chip manufacturers took on more contracts with companies from the home electronics sector, where sales were skyrocketing. When car manufacturers were ready to resume production, chips weren’t available. This created a chip shortage within the auto industry that’s still going on.
This shortage is why there’s a severe lack of selection in the automotive market right now. Since production is below typical levels, manufacturers are focusing on specific models and styles that are most likely to sell. As a result, many car buyers are having difficulty finding the exact car they want in their location with the leasing terms that suit their needs.
Due to decreased production, pricing for new cars has also risen significantly. These rates aren’t much better with used cars, either.
It’s difficult to predict when the market may recover, but it’s possible that the full range of automotive selection we saw before the pandemic won’t be attainable until 2025.
What About Trades?
When purchasing a car, many people choose to get rid of their current vehicle — if they have one. Having a vehicle to trade-in can help you get a better deal on your new ride. In the current market, however, you may not get as much for your old car as you’d like. Here are some pointers to help set you up for success in trading.
Balance Loan Payments
Before you pursue a trade, confirm if you owe anything to your current vehicle. Outstanding loan payments can be pushed onto your new vehicle, so it’s important to note this before closing a trade.
Discover Your Car’s Blue Book Value
You should have an idea of how much your car is worth before speaking to a dealer. One way you can find this out is with Kelley Blue Book. In the used car industry, we call this the “blue book value.” Simply input your vehicle’s make, model, year, and version to find out its trade-in range. After determining how much your car is worth, you can narrow your new vehicle search.
Spruce it Up
Both the interior and exterior conditions of your car can strongly influence a dealer’s offer. Take care of any maintenance issues and give your car a deep clean before requesting a price assessment to maximize your trade-in amount.
Get Multiple Opinions
Request trade-in quotes from multiple dealers to find the best offer. Most dealers will start with a conservative offer that you can typically negotiate. In the current climate, however, you may find it harder to reach these compromises.
If you’re selling your car to the same dealer you’re buying from, be mindful if they try to raise the price of the new vehicle to compensate for the trade-in price. This is illegal. Make yourself familiar with all-in pricing. This is the law in Ontario. Any dealership that is a member of the Used Car Dealers’ Association has committed to upholding the law in Ontario.
The Bottom Line
If you’re really ready for a new car, whether or not you have a trade, you’ll likely have to sacrifice certain details besides bringing up your budget, like your preferred colour or specific features. If you’re really set on a specific make and model that isn’t available yet, be prepared to wait until the market recovers a bit more.