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There's a global microchip shortage that has drastically curtailed the production of new vehicles. For many folks, now might not be the best time to buy a car.
Production is on the low, which means only one thing: soaring vehicle prices. Amid that crisis, virtually half of in-market car shoppers have postponed their purchases and others are reviewing their car buying plans.
Despite the current market situation, some circumstances will push consumers to purchase a new car now. Whatever your reason for buying a car, you need first to understand the long-term effects of the chip shortage before splurging your money.
Car buying demand is higher than the supply
In May, CNBC reported that the rate of car sales was higher than the national inventory. Industry experts predict that consumers might have to endure the effects of the tight supply throughout 2021.
The news cited the shortage in resupply, coupled with a buildup in demand during the pandemic, as the reason for the high sales margins. Additionally, the boosted demand was attributed to the exponential economic recovery, high savings, low-interest rates, and government stimulus as factors that have boosted demand.
But as the supply of semiconductor chips continues to dip, car sales are steadily going down due to disrupted production. That has significantly impacted demand, with many car shoppers waiting until the supply steadies up to consider making a purchase.
Almost 50% of vehicle shoppers waiting for chip shortage to subside
A report by The Drive indicated that about half of consumers wanting to purchase a car are willing to wait until the global computer chip-controller crisis clears up. The consumer perception about the industry's status quo, impacted by the high prices and low supply, has also led to the drastic dive in demand.
The study determined that 48% of in-market consumers have considered pushing forward their purchases due to the chip shortage. Those who were adamant about purchasing cars said they'll have to review their plans to ensure they buy a car sooner.
Among the sample population, 25% said they would switch brands, 19% considered buying a car from another vehicle category, while 18% think of purchasing a used car instead of a brand-new one.
Domestic car buying makes more sense
35% percent of shoppers said they are considering purchasing a domestic car instead of an imported brand. The high tariffs on import cars mean Americans have to pay more for every purchase.
Moreover, car insurance on imported cars is usually more expensive. Such factors influence many consumers to now consider purchasing locally manufactured vehicles to alleviate the financial stress.
Despite the chip crisis, some improvements are taking place. "Soon, the auto market will show recovery, and car prices and supply fall back to normality, though it may not match pre-pandemic levels," said Ford CEO Jim Farley.
The major challenge is tied down to TSMC, the automotive industry's primary chip supplier, based in Taiwan. However, the company is now focused on revamping microcontroller production to offset the shortage.
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