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Automakers and dealerships are driving there thanks to demand for new cars: NPR

Automakers and dealerships are driving there thanks to demand for new cars: NPR

Thanks to supply chain delays, car buyers are finding fewer choices and higher prices. But the low supply and high demand are bearing fruit for car manufacturers and dealers.



SCOTT SIMON, HOST:

It’s a really tough time to try to buy a car. According to Kelley Blue Book, the average used car is selling 42% more than before the pandemic. NPR’s Camila Domonoske spoke to buyers and sellers.

CAMILA DOMONOSKE, BYLINE: Kimberly Walker has been diving into both ends of the auto market recently. On the luxury side, she financed herself with an electric Audi at a price that blew her eyes away. The dealer wanted 68,000 for a late model used vehicle.

KIMBERLY WALKER: We went back and forth. We stayed there for four hours. They did not move on this price.

DOMONOSKE: Then his daughter needed a cheaper, older vehicle. At their $5,000 budget, the pickings were slim.

WALKER: We ended up buying a 2009 Toyota Camry that wasn’t running at the time. But the mechanic agreed to put in a new engine and gave it to us for $3,500.

DOMONOSKE: So here it is, folks. You can always buy a car for less than five thousand dollars if you don’t need it to race right away. This market is frustrating for anyone looking for a vehicle, but it’s a real crisis for some buyers on a budget.

MATT JONES: It’s disturbing.

DOMONOSKE: Matt Jones is with TrueCar.

JONES: People looking for as-needed transportation as opposed to as-needed transportation, people looking for the traditional $10,000 or $12,000 car that has, you know, 95,000 miles, those people are struggling at this market right now.

DOMONOSKE: Blame the harassed supply chains for this situation. The lack of parts, especially semiconductors, has limited the number of vehicles automakers can produce. And in response, companies are focusing on making their vehicles bigger and more sophisticated. It’s been a gradual trend for years, but the pandemic has accelerated it. Brian Moody, Managing Editor at Autotrader, sums up what automakers think about this.

BRIAN MOODY: You know what? If we’re short on resources, let’s focus on the most profitable things first. And it’s a way of selling less but maintaining our profits.

DOMONOSKE: The most profitable things are the most expensive, so that’s what companies do. When these vehicles arrive at dealerships, the forces of supply and demand push prices even higher. Then people excluded from the new car market turn to used cars and drive up those prices. And while it was tough for buyers, it worked for businesses. It turns out that selling fewer cars for more money each is indeed very profitable.

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ZACH KIRKHORN: Our highest level yet.

UNIDENTIFIED PERSON: That’s a record performance.

JOHN LAWLER: It’s our best performance since 2016.

DOMONOSKE: These are executives from Tesla, GM and Ford on their 2021 earnings. And it’s not just the automakers. Arnaldo Bomnin is the CEO of a group of dealerships in Miami. His big Chevy dealerships had 1,700 cars on the lot. At some points in the past year, that number went down to 30. They sold out as fast as he could get them.

ARNALDO BOMNIN: Which is good for resellers, isn’t it? This is not good for consumers, unfortunately. But in the end, for the dealers, it’s good.

DOMONOSKE: Last year, his company generated more than $1 billion in revenue for the first time. You might see an obvious incentive here for companies to stick to emptier land and higher prices. But Bomnin says he thinks it’s not sustainable. And when the chips come back, he hopes the volumes will come back too.

BOMNIN: If I have to choose, I’d rather have 1,700 cars in the lot.

DOMONOSKE: TrueCar’s Matt Jones says he’s confident cheap cars will eventually come back on the market. That’s good news, bad news, because it could be a problem for anyone buying at today’s high prices. Indeed, if prices fall, it will be easy to find yourself underwater with a loan. Jones recommends that if you need to buy a vehicle now, buy one that could last you a long time, because you might be tied to it for a while.

Camila Domonoske, NPR News.

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