The new car shortage is not new news for most people. If you’ve had anything to do with purchasing a new or even used car in the last 12 months, you would have noticed something was going on. Like many things, these changes are due to the global pandemic. The pandemic has resulted in chain of effects for the new car market, resulting in skyrocketed prices and extended wait periods for a new vehicle.

Increased demand during COVID-19

Thanks to the pandemic, people are avoiding public transport and leaning more towards travelling in their own vehicle. This has led to an increased demand for both new and used vehicles. This high demand has resulted in increased wait times over the last 12 months in Australia. Some consumers are reporting initial 3 month wait times being extended to up to 8-10 months! Along with this demand and increased wait times, comes the increased price of older vehicles.

Since there are less new vehicles to purchase at short notice, desperate buyers are turning to the used car market instead. However, this has meant the used market has experienced up to a 30% increase in price.

Semiconductor shortage

Another driving factor of the terrible car market at the moment is the global semiconductor shortage. These semiconductors drive many electronic components of most modern cars. This means that almost every new car in production has been hit by these delays. While many companies opted to produce cars without these features to still meet demands, many stopped production entirely to not “de-spec” the vehicles.

Sell/buy relationship

Due to shortages, most buyers are having to hold onto their used vehicle until their new car has arrived. While this is necessary to avoid being without a car, it also catapults the demand for used vehicles. Less vehicles are circulating the market while buyers are holding onto their cars in year long waits for their new vehicles. When vehicles do end up on the market, they are being price matched to similar vehicles for sale, which further catapults the price of used cars. Sellers are finding themselves able to mark up the price of their used vehicle by immense amounts and still gain interest.

So, what does this mean for me?

Well, if you’re in the market for a new car in 2022 you’ll have to weigh up cost vs need. Used vehicles are almost rivalling the price of their new counterparts. This means that if you aren’t in desperate need for a vehicle, consider looking into buying new to avoid overpaying for an older model. However, this isn’t always possible. If you are in desperate need for a car, you will most likely have to look at purchasing a used vehicle. If this is the case, do your research and shop around for a good deal. Prices are slowly decreasing, so holding out as long as possible will also be of benefit to you.

While we don’t expect the used car market to recover anytime soon, it will return to pre-pandemic levels eventually. Keep an eye out for any news about new vehicles being readily available and monitor the used car market prices. Happy buying, and good luck!