For many new and used car dealerships, the past six months have been a prolonged state of Black Friday. The same computer chip shortage slowing down the distribution of new video game consoles and PCs has destabilized car manufacturing, creating mass shortages. This has led to unforeseen shifts in demand and valuation of used cars, and new car dealerships have struggled to meet consumer needs.
According to a recent CivicScience study, the past three months have seen a noticeable shift in consumer likelihood to buy or lease a new car. The number of Americans who are at least somewhat likely to purchase a new car in the next 90 days has increased 40% since Q3 2020.
Nearly 1 in 5 Americans has been impacted by inventory shortages at their local new or used car dealership, and more than 10% of consumers intend to get involved with the car-buying market soon. With no sign of the chip shortage slowing in the near future and a significant cohort of consumers waiting on deck, the backlog certainly seems poised to endure.
Like the aggressive housing market of late, some car buyers have been willing to adjust their typical purchasing habits. While 14% of Americans in the market to buy a car are more flexible in their car-buying budget, twice as many are less flexible in light of recent shortages — perhaps a reflection of the higher price tags on used lots. Americans working reduced hours during the pandemic are largely the least flexible with their car-buying budget, while those still working the same as usual or not at all are the least likely to be on the market for a new vehicle.
A wide array of factors could be swaying prospective car buyers, from the cumulative toll of the pandemic on Americans, overly competitive market, or those who purchased their pandemic car last summer. Despite the unprecedented backlog, one-third of Americans claim to be less inclined to purchase a new or used car than they were one year ago. However, the 13% of Americans who are even more inclined to purchase are most likely enough to fuel supply concerns.
Like the lumber price hikes before it, the rush on car purchasing will eventually end, with dealers sustainably restocked with new inventory. It just remains uncertain how long it will take to get there — and how many additional prospective car buyers will find themselves backed up in the queue as they return to commutes and busy fall schedules.