The unleashing of pent up demand paired with low inventories due to the chip shortage and a COVID-19 manufacturing hangover has created a very hot car market. Cars are so hard to come by some car shoppers are willing to pay $5,000 over sticker price, according to Cox Automotive.
Kelly Blue Book, which is owned by Cox, asked folks who are planning to buy a car this year what compromises they were prepared to make to get a car in a market where inventory is currently down 42 percent from April 2020 levels. They found that 87 percent of buyers are aware of the difficulties facing the industry. But as we’ve seen with the recent fuel crunch in the Eastern U.S., people sometimes go into panic buying mode when they think even worse scarcity is on the horizon. About 60 percent told KBB they won’t delay purchasing a new car, no matter the costs. That’s certainly good news for dealers.
Here’s how Cox/KBB puts it:
Four out of ten consumers are willing to pay above the manufacturer’s suggested retail price (MSRP), and those willing to pay over MSRP are willing to accept a 12% premium. In April, according to Kelley Blue Book estimates, the average MSRP for a new vehicle in the U.S. was $41,950. In other words, many consumers are willing to pay $5,000 over sticker price.
But thankfully, not everyone is a sucker. KBB found that 37 percent of car shoppers are planning to wait to buy, if only for a few months. Still, very few of the consumers surveyed were willing to switch segments, or look into used cars as an alternative. If the chip shortage continues into the summer, these consumers might find themselves willing to pay even more for new cars.
If you are one of the ones currently shopping, don’t overpay. Don’t let the pressure of current market forces make you feel like you have to buy a car now. There will be more cars. So save yourself some money and wait. Don’t enable these dealers.
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