In fact, one of the most critical factors driving up prices is the surge in demand that has taken place over the last year. J.D. Power predicted that around 1,187,300 total new vehicles would be sold in July, which would be about 3.7% more than in July 2020 and 8.7% more than that month in 2019.
One reason for this increase in demand is the stimulus funding that many Americans have received over the past year to help battle the corona virus-induced recession. Having received several thousand dollars in stimulus payments, families find themselves flush with funds and ready to put them toward a new vehicle.
In addition, as the restrictions related to the pandemic are eased, more and more Americans find themselves going back to the office or traveling. Thus, their need for convenient transportation has increased. This has also shown itself in rising prices for rental cars and
This high demand is also evident in the time that new vehicles now spend on a lot. Currently, the average number of days a new car sits on the lot is a record low of 31 days. Six months ago, the average was 75 days.
Another factor in the surging costs for new vehicles is a severe shortage in semiconductor chips. Much of this shortage is due to a fire at a semiconductor plant in Japan whose impact continues to be felt.
Ford has in fact indicated that it doesn't see the shortage easing anytime soon. John Lawler, Ford's chief financial officer, told investors, "We do see the chip issue running through this year, and we could see it bleeding into the first part of next year."
One of the reasons it is difficult to increase supply of these chips is the complex process required to make them. Producing one chip takes approximately three months and involves 700 steps. And since fewer than two dozen companies globally produce them in large quantities, when one facility goes offline, the impact on global supply is substantial.
Of course, if you're in the market for a new car, you can't forget about insurance. Insurance can protect you and your family from major unexpected repair or medical expenses in the case of an accident. Not to mention that it's the law.
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Brandon Moore earned a Bachelor of Arts in English degree and Minor in Music at Truman State University (2021), where he has been published in the literary magazine Windfall. Originally from Illinois and Missouri, Brandon routinely travels throughout the Midwest. When he’s not writing and editing content, you can find Brandon hiking trails, writing and performing music, or spending time with his family in central Missouri.