Five reasons car prices continue to soar

The average price for a new car in December 2021 was $46,426. That is an increase of 14% or $5,850 from the same time the year before, according to Edmunds. So, what is causing this surge in prices? We looked at the top five reasons car prices – both new and used – continue to soar.

1. Microchip Shortages — there are a few reasons for the shortage that is hitting automakers. With modern technology come modern benefits and, in some cases, modern-day headaches. With continued and significant advances in technology over the years our vehicles are using more chips than ever before. From entertainment and infotainment systems, safety technology, antitheft equipment, and more, our vehicles are full of high-tech gear. ALL these items rely on semiconductor chips, compounding the issue and contributing to the shortage.
   
2. Supply Chain Issues Continue – the COVID-19 pandemic has also become known for monumental supply chain issues. Things started to snowball in March of 2020 when the world began shutting down and quarantining. Because of those changes, automakers forecasted less demand for new cars and a reduction in overall sales forecasts. Parts orders, including those for microchips, were canceled or reduced, and workforces were laid off. In retrospect the reduction in demand for vehicles was only temporary but, by the time car makers realized the mistake it was too late. The industry is still working to recover, a factor that is also driving up the cost of vehicles overall.
   
3. Less Workers – according to Kelly Blue Book, car manufacturers reported they were unable to fill more than 600,000 jobs by the first part of the fourth quarter of 2021. This lack of available workers continues to add to the chain reaction caused by the many other factors contributing to the overall hike in prices. Some automakers and manufacturers have made efforts to increase their ability to find and keep good employees by offering signing bonuses or other incentives, an increase in wages, or additional time off among other benefits.
   
4. Low Inventory – with the supply chain issues and the inability for manufactures to keep up with the demand of new vehicle sales, there is a reduction in overall inventory of vehicles — both new and used. That lack of availability in new vehicles also means that less people are willing to sell or trade in vehicles, which is also causing an extreme dip in the availability of used vehicles. Topping off this challenge is that people are paying up to $10,000 more for used vehicles over the same time last year and many are paying above the sticker price on new cars.
   
5. Corporate Greed – politicians and economists alike continue to debate this issue noting some companies are taking advantage of the current times to increase profits. Others say this is not the case as there are many other contributing factors (also discussed in this article) at play and corporate greed was not born in the pandemic.

These challenges are not quickly going away. In fact, some industry experts suggest we may never get back to 2019 pricing. Many also indicate the chip crisis is unlikely to repair itself until the year 2023 – at the earliest. If those projections remain true it would follow that the production of new vehicles will also continue to lag and it will take even more time before we see those numbers return to “normal” or a “new normal” in a post-pandemic era.

The Solution

Car dealerships have always been faced with challenges and they understand that consumer loyalty is a critical component in keeping up their bottom line. If you are a car dealership and you feel like you are facing an uphill battle, you are not alone. But no matter what challenges lie ahead, we can help with our industry-leading solution, DealersEdge.

Used by the automotive industry, this solution turns one-time buyers into loyal, repeat buyers. As a dealer, you know the sale of a vehicle will impact your bottom line and your dealership goals. One sale may may even garner end of the month incentives. But when a customer makes a purchase, and invests in a vehicle, it goes well behind a single transaction.

Attracting buyers to your service department for that first oil change (after they have purchased a vehicle) is one key to retaining them as loyal customers. But the time, coordination, and expertise involved in planning and executing a highly impactful program can be overwhelming and expensive. Our industry-leading, comprehensive service-customer attraction and retention solution, DealersEdge, is designed to attract vehicle buyers back to your dealership’s service department. Our customized premium and offer packages stand out in the mail and encourage buyers to schedule their first service visit within 90 days of their vehicle purchase.

Attracting Buyers

Our beautifully designed packages will surprise and delight your customers and are proven to increase first time service-visit rates.

Cut through the advertising clutter and attract buyers with:

• Branded dimensional mailers that stand out in the mail.
• A VIN-matched touch up paint pen or branded high-perceived value premiums that suit your brand and market.
• A personalized letter to the vehicle owner.
• Customized, redeemable offers on the vehicle owner’s first service visit.

DealersEdge will also assist in establishing positive goodwill toward your dealership, increase opportunities for additional engagement, and build consumer loyalty.

We are excited to collaborate with you to develop your industry-leading, customer retention and appreciate programs. Please contact us today for a free consultation at: 800.562.9733.