So why are cars so expensive right now—and how can you save money on financing if you do need to buy a vehicle?
Unprecedented market conditions have resulted in very high prices for cars in many parts of the country. Basically, the root of the problem is a shortage of computer chips.
A modern car uses computer chips in a variety of electronics systems such as power steering, back up cameras, and emergency braking systems. Car manufacturers halted production at the beginning of the COVID-19 pandemic and cancelled orders for these critical parts.
Unfortunately, chip manufacturers also stopped production to keep their workers safe during the pandemic. When auto manufacturers reopened production lines, they discovered a major shortage of chips.
Global demand for connected microwaves and other smart devices gobbled up much of the supply, while COVID-19 outbreaks further knocked the chip industry off track. The end result: fewer new cars on dealership lots.
Strong demand and low supply have driven prices higher. Manufacturer incentives are down too—with fewer 0% or low APR* deals, slashed rebates, and higher lease prices.
Nationwide the price of a new car has risen an average of about $278 above suggested retail price according to Edmunds. This is a big shift from pre-pandemic when prices were about $2,000 below retail. The tough market conditions for new vehicles have forced buyers to invade the used market, driving up prices there as well.
Rental companies who normally contribute inventory into the used market are holding onto their vehicles because they can’t replace them with new stock.
How Can You Save?
While you may end up paying more for your vehicle, one place you can save is on financing. Baltimore County Employees Federal Credit Union has some of the lowest interest rates in the region for new and used vehicles. Getting pre-approved for a low-interest rate auto loan from your credit union before you buy means you’ll know exactly how much you can spend, your financing is already in place when you find just the right vehicle, and you can save time at the dealer closing the deal. Once approved, you have 60 days to shop for and buy a vehicle.
You may not have much choice about inflated vehicle prices, but you can choose to pay less for your financing. Check out our auto loan interest rates, use our calculator to figure out a payment that fits your budget, and when you’re ready to apply, talk with a Loan Counselor at 410-828-4730, 800-234-4730 or click here for our easy online application.
*APR= Annual Percentage Rate