New car buyers face slim pickings and high prices amid inflation and supply shortages

After two years of pandemic living, Americans are getting used to strange times — and that has spilled over into auto shopping.

Visit any car dealer and on many days, the empty spaces where vehicles once sat reflect the factory shutdowns, delivery issues, and computer chip shortages stirred by the pandemic. Vehicles are harder to come by, with consumer demand unabated.

Vehicle inventory in March 2022 stood at one-third fewer vehicles on dealers’ lots than the 1.4 million seen a year earlier, according to J.D. Power. Customers have resorted to ordering cars sight unseen, buying cars that are not exactly what they want, and often paying over sticker price.

“We’re being allocated vehicles probably at about 60% to 65% of what we normally get,” said Jeff Glanzmann, general manager of Glanzmann Subaru in Willow Grove for 14 years. “Our lot in terms of new-car inventory is certainly not anywhere near what it should be. We’ll maybe have five or six new cars on the ground at any given time, where pre-pandemic, we might have had close to 200.”

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Other dealers tell a similar story.

At Pacifico Ford, Mazda, and Hyundai in Southwest Philadelphia, the inventory varies, depending on the day. Maria Pacifico, president of the dealership, said the vehicles leave not long after they arrive, about half of them made to order.

“We are pre-selling probably 50% to 60% of inventory,” Pacifico said.

Clint Ehlers of Lower Gwynedd might be a unicorn in these tough times: He got what he wanted for a fair price, without a huge wait.

About six weeks ago, Ehlers spotted a 2022 Subaru Outback Wilderness at Glanzmann in the color he wanted — blue — but it was already sold. Upon his return about a month later, he found another blue one, but it was Glanzmann’s demo vehicle. So Ehlers ordered a vehicle, and waited two weeks for delivery from the dealership.

“They’re like every dealership out there: They order a bunch of cars to come in but they’re all sold basically by the time they get to the lot,” the 57-year-old graphic sign franchise owner said.

A regular car buyer who said “I hate going to dealerships,” Ehlers did the kind of homework he usually does when buying a car and found he was getting the best deal for the times.

“I price shopped them,” he said with a laugh.

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Trends are showing that the prices for new cars are on the rise. The everything-cars site Edmunds.com numbers showed that the average price of a new car for March was $45,120, or $677 over the average sticker price.

Ford has been one manufacturer that has pressured dealers not to sell over the sticker price, Pacifico said, a price point she said her dealership has always considered the limit.

In an email, Ford representatives shared an Edmunds report that ranked car companies by the average transaction prices above the sticker price. In January, about 82% of buyers paid above the sticker price compared with only 2.8% in January 2021. According to the ranking, Cadillac, Kia, and Land Rover commanded the highest average increase over the sticker price, while Alfa Romeo, Volvo, and Lincoln had the most modest increases. Ford ranked 26th out of the 33 surveyed companies, with an average increase over sticker price of only $163.

Consumers may begin to see changes in vehicles in stock and what they can order.

“Ford is conveying that if you don’t order certain options your vehicle will be built faster,” Pacifico said. Ford did not respond to a request for comment.

Toyota’s sales team said in an email that vehicle production at its North American factories has been affected by supply chain disruptions, and that availability of some premium features could be limited.

The lack of selection and negotiation means some potential buyers are walking away.

Richard Chaitt of Havertown thought it was time to shop for a new Subaru with his wife, Shelley. But they have given up the search, and for now will keep driving their 2008 Chevrolet Impala.

“If you have to have a car, you’re between a rock and a hard place,” said Chaitt, 75.

What can help change the tough buying situation? In the broader economy, the Federal Reserve is turning to interest rate increases to slow inflation, though these moves will also make borrowing money to purchase a car more expensive.

Automakers advertise low rates for new-car loans because they are able to subsidize those loans, said Jessica Caldwell, Edmunds executive director of insights. But as rates go up, it may be the final blow for consumers.

“So I’m asked to pay a higher price for a vehicle that is not really necessarily my perfect vehicle, higher interest rates, and now higher gas prices are making the market pretty unfriendly for a lot of consumers,” Caldwell said. “So I think people are just walking away, and they’re just saying, ‘I’m just going to wait; there’s just too many things against me.’”

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How long this goes on is anybody’s guess. Factory shutdowns in the West are infrequent these days, but China remains on a zero-COVID policy, and that could have worldwide effects.

Caldwell is hesitant to speculate but cites what she’s heard from manufacturers and dealers that supply and demand probably won’t realign until 2023, at the earliest.

And even then, car shopping won’t be easy, with spotty inventory, stop-starts at factories, and a continued high demand from consumers such as Chaitt, who are waiting out these times.

“It makes me believe the recovery process is not going to be linear or smooth; it’s going to be up and down,” Caldwell said.