Overall inflation across the U.S. hasn’t been the only driver concerning elevated prices for new cars. A worldwide microchip shortage has led to a decreased supply of new cars, and manufacturers are unable to keep up with demand. Kelley Blue Book (KBB) reported that manufacturers produced 2 million fewer cars in 2021 than in 2019, the last year prior to the pandemic. Production also slowed in 2020 with plants closed for weeks or months at a time to prevent the spread of COVID-19.

                By                    Dawn Allcot

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To keep up with demand, some manufacturers are stripping features requiring microchips from some vehicles, and offering discounts or offers to retrofit the features when chips become available.

Other Problems Plague New Vehicle Production

While these measures are helping to alleviate some of the new vehicle shortage issues, the lack of chips isn’t the only problem plaguing manufacturers. KBB reported that the vehicle shortage (and resulting record-high car prices) could last into 2023.

The Russia-Ukraine war has affected the manufacture of many auto parts, which is slowing production for automakers including Porsche, VW, and BMW, per KBB. Meanwhile, another COVID-19 outbreak in Asia has slowed the delivery of some Toyota parts, forcing the manufacturer to scale back production for the next three months.

Federal Legislation Seeks to Reduce Reliance on Foreign Chips

Legislation before Congress seeks to encourage microchip production within the U.S., a scenario which could help solve some of the supply problems related to importing chips from overseas. However, neither piece of legislation has gained approval from both the Senate and the House, and they might be too different to reconcile into a single law. Under the CHIPS for America Act, the federal government would invest $52 billion in domestic research, design and manufacturing. The FABS Act, by comparison, seeks to offer tax credits to companies building new chip manufacturing capabilities within the U.S.

However, even if legislation passes in order to encourage domestic semiconductor production, it won’t solve the immediate chip shortage problem.

How to Buy a New Car Today

Kelley Blue Book reported that vehicle prices remain about $5,000 higher than they were in Feb. 2021, although prices have started dropping. If you’re in the market for a new car, it might pay to hang tight for next nine months or so.

If you absolutely must have a new car, shop around. Some manufacturers are facing worse shortages than others. You may consider traveling outside your region to find the car you want (within your price range).

See: 20 Questions You Need To Ask Your Car Dealer Before You Buy Find: 30 Biggest Do’s and Don’ts When Buying a Car

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