As just about everyone knows by now, an international shortage of semiconductor chips has drastically cut auto production worldwide, leaving most dealerships with far fewer vehicles on their lots than usual. New vehicles need as many as 100 chips in them, used for everything from power steering to backup cameras.
At the same time, demand for cars is high, fueled by some consumers who are flush with cash after cutting back on expenses such as travel and eating out during the pandemic, rock-bottom interest rates, and high trade-in values for used cars.
Here are some things to know:
Q. What are prices like for new and used cars?
Nationally, the average asking price listed on dealers’ websites for a new car now exceeds $40,000, and for a used car, $30,000, according to an analysis by iSeeCars.com, a Woburn-based national car search engine company.
In the Boston area, the average list price is only slightly lower: $39,130 for a new vehicle, $29,120 for a used one, according to the analysis.
The average list price in Boston for a new car is about 10 percent higher than two years ago. For used cars, the local average list price is a whopping 28 percent higher than two years ago, according to the analysis.
Q. Are new cars selling above the manufacturers’ suggested retail price (MSRP)?
A. Yes. In the Boston area, the average list price is about 9 percent above MSRP, according to the iSeeCars.com analysis. That’s significantly higher than nationally, where the average list price is about 1 percent higher than MSRP, according to the iSeeCars.com analysis.
Q. Are cars selling quickly?
The average “days on market,” a measure of how quickly vehicles sell, has shrunk dramatically for new cars. Nationally, a new car sells in an average of less than 29 days, compared to 54 days two years ago. A used car sells in an average of 35 days, about the same as two years ago.
In the Boston area, new cars are being snapped up in an average of less than 24 days, compared to 62 days two years ago, and used cars are selling on average in less than 36 days, about the same as two years ago.
Q. How unusual are present conditions?
A. Rarely have so few vehicles been available for sale. Domestic manufacturers produced about 112,000 new vehicles in July, according to the US Bureau of Economic Analysis. That’s the fewest by far since April and May of last year, when the pandemic closed factories. And it’s less than one-third of the average monthly output of vehicles over the last 25 years.
Q. When are manufacturers expected to get back to normal production?
A. Don’t hold your breath. General Motors, the second largest manufacturer by retail market share (Toyota is No. 1), announced last month that it would pause production at eight of its 15 North American assembly plants.
And Ford, the fifth largest manufacturer, said it would stop making pickup trucks at its Kansas City plant, and cut shifts at two other plants.
Q. What are the experts saying about production?
A. One forecaster, IHS Markit, a London-based company that specializes in market data analysis, last week slashed its estimate for auto production — not only for this year and next year, but also for 2023. IHS has repeatedly lowered its production estimates all year, citing the semiconductor shortage, supply chain disruption (remember the blocked Suez canal?), a factory fire in Japan, winter storms in Texas, and the spread of COVID-19 in Southeast Asia, an important center for semiconductor production.
Q. What are the experts saying about sales?
Sales nationally are expected to be off by about one-quarter this month, compared to the spring, when car sales briefly began to climb, according to LMC Automotive, a consulting firm.
Q. What advice should consumers follow?
A. Julie Blackley, an analyst with iSeeCars.com, said consumers can begin shopping by using a data-driven auto search engine, like Autotrader.com and CarGurus.com, or her own company, which analyzes and compares publicly available data from manufacturers (MSRPs) and dealers’ websites (list prices).
Q. Is waiting to purchase a vehicle a good option?
A. Yes, but it’s not practical for people who may need a new vehicle for work or other obligations, Blackley said. For consumers without a pressing need, keeping your current car may make sense, even if it means plowing more money into repairs or maintenance, she said.
Q. But what if you can’t wait?
A. Be less choosy, she said. “Maybe you don’t get your first-choice for color, trim, or even the model you had in mind,” she said.
Blackley also said consumers should widen their search radius to dealerships further away from home to improve their chances of getting the car they want.
Q. Is it better to buy a new or used vehicle?
A. Because the prices of used vehicles have increased so much more than the prices of new ones, you may want to consider buying new for the extra value, Blackley said. One consideration is that most lenders will offer a lower interest rate on the purchase of a new car, compared to a used one.
The big jump in the cost of used cars — 28 percent higher than two years ago in the Boston area — is a result of higher demand, in part from consumers put off by the high cost and lack of options when shopping for new cars. Another big factor is that rental car companies, unable to refresh their fleets with new cars, are buying up used ones at auction. The spike in used car prices has been cited repeatedly in reports on inflation in recent months.
Q. What models are in most demand in Boston?
A. The fastest-selling new car is the Lexus IS 350, which is selling on average in about four days, Blackley said. The fastest-selling used car is the Toyota Prius, which sells on average in 15 days.
Other popular new vehicles include Toyota 4Runner, Kia Telluride, and Ford Bronco, all SUVs.
Less expensive models, such as sedans, may become harder to find because manufacturers are focusing on building pricier ones to boost profitability, Blackley said.