EL SEGUNDO, Calif. — Buying a car is a bit tricky right now.
Brand new ones are a little hard to come by, and used cars are way more expensive than normal. So why is that?
5 things you need to know:
- It’s because of chips — and there’s a shortage due to the pandemic and a strong bounce-back economy. You may have even gotten a call from your car dealer asking to buy back your vehicle. The price of new cars and trucks are up by 5%, and used cars are even up by 45% since 2020.
- Basically, automakers — fearing they’d be left holding expensive inventory while people were in lockdown — shut down production and cancelled orders for parts with chips in them, thinking car sales would stall.
- Meanwhile, many of us sat at home buying more and more personal electronics: computers, phones, televisions — and guess what? There are tons of chips in those.
- People were soon buying cars again — the ultimate social distancing device on wheels — and dealers had, well, deals. Factories suddenly restarted and couldn’t keep up with demand. Plus, there are only a few global suppliers of computer chips. There was even a fire at a plant in Japan, which made a massive dent in chip production.
- Economists estimate the chip shortage meant 1.28 million fewer vehicles being created, which will cost the auto industry $110 billion this year. Production will eventually normalize, but for now, you may find some new cars with less of the features you might expect — such as automatic stop-start — because manufacturers are making cars with less chips in them in order to catch up.
One possible solution to the shortage is reinvesting in homegrown chip production.