How to buy a car this summer
When the chips are down, here's how to come out—well if not ahead, a little less behind. Also: our trivia winner and an Understandably Live event (today!) Plus, 7 other things worth your time.
You know what’s crazy right now? Car prices.
It’s largely a simple matter of supply and demand, and it starts with computer chips. I think the history went like this:
First, the 2020 trade war with China stopped US companies from buying Chinese chips. Companies looked instead to Japan, Korea, and Taiwan, but those countries’ manufacturers were already near capacity.
Then, demand for chips skyrocketed during the pandemic. People who were stuck at home upgraded their equipment, and global shipments of consumer PCs jumped 26.1% over 2019.
Next, Taiwan suffered a drought. Chip manufacturers use massive amounts of ultra-pure water, so their production dropped.
Then there was a fire at an important Japanese factory, and domestic chip production in Texas took a hit as a result of the extreme freeze in February.
Fewer chips means fewer new cars. Add that to the general rising tide of inflation, and it’s one of the toughest times to buy a car in recent memory.
OK. So what’s the solution, if you’re in the market for a new car and can’t wait all this out?
I reached out to a number of car dealerships, ex-salespeople, and some of the burgeoning crew of startups and consultants who try to help customers negotiate better car deals. The advice I heard was pretty consistent, including:
New or used?
Again, it’s a matter of supply and demand—and if you’re willing to expand your new-car search to include a gently used one, there’s theoretically more supply. Although, as Zach Shefska, CEO and co-founder of the online car-buying community YAA told me, prices for used cars are up, too.
“Wholesale used vehicle prices increased for 22 straight weeks before beginning to decline just two weeks ago,” he said. “That's incredible… Cars, trucks, and SUVs are typically depreciating assets, not appreciating ones.”
Can I interest you in a sedan?
They’re a little less popular than SUVs and pickup trucks, so you’re competing with fewer other buyers for these kinds of vehicles. In general, the deals are better on sedans right now.
Maybe a lease?
Normally, I’m dead-set against leasing, after having a bad experience when I was younger and paying the price. Of course, I’m probably an atypical buyer, in that I also run my car-related decisions by 100,000 readers before moving forward (or not).
That said, given current scarcity, leasing might be a smart option.
“If you can’t get what you really want, you might as well just borrow what you kind of want,” Ivan Drury, an automotive analyst for Edmunds.com, told the Wall Street Journal recently.
Finally, semper gumby
In other words: Be willing to stretch a little.
“Be flexible,” suggested Brian Moody, executive editor at AutoTrader.com. “Don’t insist on special options or colors.”
He also suggested looking deep into the data—dealer inventory records, that is—and targeting specific cars for which scarcity is less of an issue.
And speaking of data
Among other things, he’ll give us some of the Autotrader data on which car makes and models specifically aren’t in as short supply, and how you can use that to your advantage.
Honestly, the more I got into this yesterday—the origins, the shortages, the strategy—the more I realized what an interesting story this is.
So if you’d like to continue the discussion, just sign up below. I’ll send emails and calendar invitations with the Zoom link later this morning; just remember the discussion itself is TODAY at 2 p.m. ET.
Call for comments: In the meantime (or afterward, that’s cool, too), do you have car-buying plans this summer? And what’s your best car-buying story ever? I have a good one myself; I’ll add it in the comments.
Friday’s trivia contest winner was Teri Benaron of Greenwich, Connecticut.
(Correct answers: Thomas Plaskett was the father of the frequent flyer program; pareidolia is the technical name for the phenomenon of seeing faces in everyday objects; Ted Lasso was the Apple TV show that got 20 Primetime Emmy Award nominations.)
7 other things worth your time
Jeff Bezos and friends blast off to space at 9 a.m. ET today. The whole mission will be livestreamed at Blue Origin. (Blue Origin)
Raging wildfires in Oregon have burned an area equivalent to Los Angeles and show no signs of slowing down. (AP News)
A coalition of Western governments accused China of backing the hack of Microsoft Exchange servers earlier this year as part of a broader espionage effort. (BBC)
Senate Democrats have proposed requiring women to register for the Selective Service system. This has come up many times over the years, and almost passed in 2016, but has never quite happened. (Politico)
An upstate New York brewery is now selling Help Wanted brand beer, which comes with a job ad on the can. The job is at the brewery itself, which had seven open positions when it launched this effort. (NY Post)
Toyota, which is Japan’s largest carmaker, won’t air any Olympic-themed advertisements on Japanese television during the Tokyo Games, as COVID-19 infections continue to rise ahead of Friday’s opening ceremony. “There are many issues with these Games that are proving difficult to be understood,” Toyota Chief Communications Officer Jun Nagata said. (AP)
America’s 10 lowest cost of living states. Here, let me tip it off for you—Mississippi is the cheapest, followed by Kansas and Oklahoma. (CNBC)
Thanks for reading. Photo credit: Pxfuel. Want to see all my mistakes? Click here.