You may experience an extreme case of sticker shock the next time you visit the car dealership. The average new car price in December 2021 was more than $47,000, up 14% (or nearly $6,000) from the same period just one year prior.
The price rise is the result of dueling extremes in automobile supply and demand. The latter has been historically high for months. It has been fueled by factors including more workers returning to the office and needing cars to get there and people having more cash on hand to purchase vehicles because of the reduction in activities like vacations and dining out. Plus, auto loan interest rates remain low.
But as demand for vehicles has surged, supply has dwindled. Auto manufacturers around the world have been suffering from a global computer chip shortage and drastic supply chain issues.
The result is record-low inventory numbers. There were fewer than 900,000 new cars available for sale to American consumers last fall, according to Cox Automotive. That’s down from nearly 2.5 million in 2020 and 3.5 million in 2019.
The outlook doesn’t look much more promising, as the current war in Ukraine has already showed signs of disrupting supply chains even further.
All of this turmoil is ultimately paid for by the consumer. In February, Edmunds reported that more than 80% of new car buyers are paying above sticker price. The effects of the volatile new-car market has now trickled down to used cars.
With less new model year vehicles available, shoppers have been turning to used cars, making them hot commodities. In turn, the average listing price for a used car has risen to a record-high $28,000.
Don’t let high prices scare you off from purchasing a new vehicle – and don’t spend more than you need to. As always, AAA is here to help. AAA’s Auto Buying Program allows you to compare vehicle reviews and lock in savings before visiting the dealership. Members save an average of more than $3,400 on new vehicles.