In 2022, the car inventory shortage made it especially challenging for prospective buyers to find and purchase their dream vehicle. The COVID-19 pandemic, supply chain scarcity, microchip shortages, limited labor capability, as well as increased demand have all contributed to the substantial reduction in inventory that has taken place for the past three years.
As we enter the beginning of a new year, many buyers are eagerly awaiting the chance to finally purchase a new car for their desired price. Will the car inventory shortage continue into 2023? Keep reading to learn more about the car inventory shortage and discover what may be in store for buyers this year.
What Is a Car Inventory Shortage?
A car inventory shortage occurs when there is a higher amount of demand than supply or if there are more buyers than vehicles available for purchase. Car inventory shortages can drive up the cost of purchasing a vehicle, limit the availability of certain models, and impact trade-in values.
What Causes Car Inventory Shortages?
During the early stages of the COVID-19 pandemic, it became increasingly challenging for vehicle manufacturers to receive necessary car parts that were in the process of being shipped. Supply chain limitations, pandemic lockdowns, and work restrictions also decreased labor, making it difficult for automakers to continue to operate business as normal.
This sequence of events has led to higher car prices, decreased availability of vehicles, and buyer limitations that have continued from 2020 through the start of 2023. In addition, with lower economic health and a decrease in the number of customers purchasing vehicles at the height of the pandemic, manufacturers substantially reduced their orders for semiconductor microchips.
As demand began to increase as the economy improved, the resulting influx of semiconductor microchip orders from automakers caused both a national and a global microchip shortage, further impacting the car inventory shortage.
How Does an Inventory Shortage Affect Car Prices?
The vehicle inventory shortage affects the costs of both new and used cars. With low supply and high demand, prospective buyers are left with no choice but to pay more or wait until prices hopefully decrease in the coming months or years.
JD Power found that the average cost of a new car rose 2.5 percent from 2021 to an estimated $46,382 in December 2022. The percentage of increase in price ranges depends on which vehicle is sold and how in demand it currently is. For instance, vehicles such as the GMC Sierra, Ram 1500, Ford F-150, and Chevrolet Silverado saw the highest price increases between November 2021 and November 2022.
Unfortunately, increased car prices have not been exclusive to new cars in recent years. Ally Financial reported that used car prices rose six percent between 2021 and 2022 and predicted that it could take until 2023 to see prices diminish.
Will the Car Inventory Shortage Continue in 2023?
As the global microchip shortage has improved in recent months and as labor and production have increased, the vehicle manufacturing industry is seeing improvements to the car inventory shortage in the early months of 2023. With increased available supply and higher production rates, 2023 may see a decrease in vehicle pricing.
Will Car Prices Fall or Rise in 2023?
When microchips became limited in availability, vehicle manufacturers began prioritizing the production of higher-value vehicles to continue profiting from sales. The limited vehicle availability and abundance of high-priced cars made it difficult for customers to stick to their budget when car shopping.
However, as supply has increased and demand has somewhat diminished in recent months, prospective car buyers are expected to see prices finally begin to drop and observe an increase in vehicle availability.
Data from Cars.com reports that their dealers had 1 .4 million vehicles listed for sale in November 2022, a 31 percent increase from May 2022 and a 40 percent increase from May 2021. Although the data shows an increase in available vehicles since 2021, availability is down from the 3.2 million vehicles that Cars.com dealers listed in November 2019, which represents a 57 percent decrease in availability.
The resulting increase in vehicle availability from improvements within the car inventory shortage will translate to lower prices for car buyers in 2023. As inventory is shipped out throughout the year, prices will continue to fall.
New Car vs. Used Car Inventory and Prices in 2023
Not only does the inventory shortage affect new and used cars, but trade-in vehicles are also affected heavily by the inventory shortage. The payoff of trading in a used car can help to combat skyrocketing vehicle prices due to the current lack of vehicle supply.
JP Morgan estimates that new vehicle pricing will decrease between two and a half to five percent, and used vehicles will see a decrease in price ranging from 10 to 20 percent in the year 2023. However, as car availability increases, consumers will likely see a decrease in vehicle trade-in value.
That said, if your used vehicle is in high demand, you may be more likely to receive a substantially higher trade-in offer. Cars with 2018, 2019, 2020, or 2021 model years, such as the Kia Optima, Toyota RAV 4 Prime, Toyota Corolla, Tesla Model Y, and Tesla Model 3, were reported to have the highest rising resale values on average by a recent Cars.com study.
When purchasing new cars, vehicle markups that resulted from the inventory shortage are beginning to decrease. Data from Jominy discovered that 51 percent of customers paid higher than the average sticker price for their new cars in November 2022, a decrease from 68 percent of customers in the summer of 2022.
What To Know When Buying a Car in 2023
With decreased prices and increased vehicle availability on the horizon for 2023, many car shoppers may choose to purchase their desired car this year. U.S. News & World Report found that the month of May is an ideal time to purchase a vehicle due to the end of auto show seasons. As car dealerships begin to clear out their inventory of vehicles, customers are more likely to receive lower prices than in other months of the year.
Not only can the time of year affect the cost of your prospective new or used vehicle, but factors such as location, shipping options, distance, and car size can all impact the overall cost to purchase.
Look up the Kelley Blue Book Value of the vehicle you may want to purchase to determine how the offered price compares to the average price on the current market. Doing so will help you ensure you receive the best price possible for a vehicle of that make and model in the current buying market.
The Bottom Line
Once you have purchased a vehicle, the next step may be to ship it to you. Enlisting the help of a car-hauling service, such as Carvaygo, can ensure that your vehicle arrives safely and efficiently from point A to point B. Our team of trusted carriers offers enclosed, open, and expedited vehicle transportation services that will protect your newly-purchased vehicle.
Interested in car-hauling services? Visit our website today.
Sources:
Up And Up In December: New Vehicle Sales Increase, Transaction Prices Hit Record High And Inventory Rises | JD Power
Used Car Prices Continue To Climb But You Could Still Save | Ally Financial
Is The Inventory Shortage Coming To An End? Cars.com
What Are The Used Cars With The Highest Rising Resale Value? Cars.com
The Best Month To Buy A Car In 2023 | NASDAQ
When Are The Best Times To Buy A Car? | U.S. News & World Report
My Car’s Value | Kelley Blue Book
