New Car Prices Hit All-Time Record High
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New car prices are through the roof. If you thought cars were expensive before, they’ve now hit an all-time record average price.
A number of factors likely contributed to this rise, some of them related to challenges stemming from the pandemic. How these factors will continue to play out over time remains anyone’s guess, but for now, Jerry can help you understand how to handle the current market.
New vehicles going for record prices
It’s no secret: the new car market is a total mess right now
The average price for a new vehicle in July of 2021 was a whopping $41,044, according to Yahoo Finance. The previous record, set just a month before, was $39,942.
The high demand fueling this rise in prices is evident in the number of vehicles currently on lots. At the end of July, dealers had approximately 932,000 new vehicles for sale.
If you compare that with the 3.1 million vehicles they had for sale two years ago, you can see that there’s a supply and demand problem at work.
Several factors are driving demand
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 used cars.
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.
New car supply is also a problem
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.
As the Washington Post recently reported, 17 automakers have cut back production in recent weeks due to their inability to source these chips. These automakers include Ford, General Motors, Tesla, and BMW.
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.
When you’re shopping for a car insurance policy, Jerry can help. Jerry’s free app quickly and efficiently compares quotes from many companies, so you can find the policy that’s best for you and your needs. Jerry will also continue monitoring your policy every six months to make sure you’re always getting the most bang for your insurance buck.