Why Price Hikes on Cars May Be Here to Stay

The auto industry is experiencing an unprecedented time right now for both consumers and sellers alike. Dealerships are now able to sell cars at prices far higher than ever before, with many shoppers even paying above the original suggested retail price (MSRP) for vehicles.

Amid rapid inflation, many wonder what exactly is causing the price hikes on vehicles. While inflation is certainly not helping, it’s also not the only element at play. In addition to prices naturally rising due to the economy, vehicles across the country have risen in price due to several factors such as supply chain issues, overwhelming demand, and commodity prices. Because of these various factors, it’s unlikely that the price hikes on new and used vehicles are likely to go down anytime soon; here’s why.

Supply Chain Issues Continue

Everything always starts and ends with the supply chain. If the number of buyers outweighs the number of items in stock, it’s only logical that demand will cause the said item to go up in price. Supply shortages drive up the value of goods and services, leaving nearly all industries affected. Since 2020, shortages have affected the prices of various goods including computer parts, video game systems, gasoline, and – you guessed it – automobiles.

There has been a major shortage of car parts like semiconductor chips, no thanks to outside factors such as the current overseas conflict. The semiconductor chip shortage has been directly affecting the supply chain, and until the shortage ends, things are likely to stay the same.

Low Inventory

Another clear reason why vehicles have become more expensive is the lack of inventory. Because of supply chain issues, fewer new cars are being made. And as a result, dealerships have fewer vehicles in stock and are raising prices to compensate. These increased prices will likely remain for the duration of the inventory shortages which– judging by the state of the supply chain– will be the case for the foreseeable future.

And while AAA’s David Bennett claims that “there are still ways to negotiate” vehicle prices, it’s still incredibly important for consumers to do their own research. There’s always some wiggle room for dealers, though the prices aren’t likely to budge too much. 

Consumers Are Willing to Pay

At the end of the day, it all comes down to whether or not consumers are willing to pay – and according to recent reports, they most definitely are. Auto industry sales are steady, as prices have only risen over time. And because consumers are still buying vehicles, sellers have no reason to lower their prices.

Some sources predict that these prices may dip at least slightly in the next few years. One outlier is Ally Financial, a large auto lender, which predicts that there will be roughly a 15 percent reduction in used vehicle prices by the end of 2023. It’s unclear whether this will be the case or not, as a few different factors like consumer demands and supply chain problems will need to be sorted out first; it’s not impossible, however.

Use Super Dispatch to Keep Track of Inventory

If you work in the auto industry and would like some help staying ahead of the curve, Super Dispatch may be the perfect tool for you. Super Dispatch’s mobile app allows users to more easily manage inventory, send and receive shipments, and track shipments to learn where your inventory is in real-time. Additionally, our service can help you more easily keep track of costs and overhead, and help you save money and time in the long run. And best of all, Super Dispatch is completely free to try. Request a free demo today!

Published on May 5, 2022