In its preliminary estimate, Cox Automotive predicts that sales for the month will be down 8.5% from August and 26% lower than September 2020. In fact, when all the figures are tallied, Cox expects the worst month for new car sales since May 2020, when most of the economy was locked down.
By all accounts, there are plenty of people shopping for a new car or truck. But there are fewer choices as the shortage of new and used vehicles gets worse.
“After a strong spring selling season, the supply situation has worsened precipitously and is dragging sales down with it,” said Cox Automotive Senior Economist Charlie Chesbrough. “The monthly declines have been large – the sales pace has declined by more than a million units in each of the past five months. Available supply on dealer lots is now 58% lower than last September, down nearly 1.4 million units.”
Negative impact on consumers
This is having a negative impact on car buyers in a number of ways. First, there are limited vehicles to choose from. Forget color, you might not be able to find the model and trim level you want.
Buyers lucky enough to find their desired vehicle will have much less leverage negotiating a sale than they might have had before the pandemic. Manufacturers have cut back significantly on incentives because the vehicles are selling without them.
Dealers aren’t just holding to the sticker price; in some cases, they are raising it for vehicles that are popular or in short supply. That’s sending more buyers to the used car market, where prices have also risen and some late model cars and trucks are hard to find.
Still not enough computer chips
Auto industry analysts have not yet forecast an end to vehicle shortages, which are largely caused by a shortage of computer chips and other supply chain issues. That could mean very few vehicles for sale in December, a time when buyers traditionally reap savings with end-of-the-year sales.
An earlier study by Kelley Blue Book found that consumers in the market for a new vehicle are prepared to call off their search for three or more months. That, at least, could alleviate some of the demand pressures.
“With a large portion of the in-market population now saying they plan to delay their purchase given the current market conditions, it will be interesting to see how that could impact the ongoing delicate balance of supply, demand, and pricing across the industry,” said Vanessa Ton, senior industry intelligence manager for Kelley Blue Book.