The Perfect Consumer Car Storm has Arrived

The perfect storm for automotive consumers has arrived and buyers should take advantage of it. Never before has this author seen an opportunity like this present itself.

Why should the consumer consider trading their vehicle now?

After thirty-one years in the automotive business, my friends' perpetual question is: When should I trade my vehicle?

One year ago, my standard answer was to keep it as long as it meets your transportation needs. Automotives do not appreciate; they depreciate.

Today, I have a very different answer. The perfect consumer storm has arrived. With current new vehicle and truck prices held at factory MSRP prices set at the beginning of the model cycle and pre-owned values soaring, it may be a great time to trade up or, more accurately, win.

What is going on?

A global shortage of microchips, material shortages, and international transportation delays have reduced almost all automotive manufacturing capabilities. Per multiple articles and reports from the Wall Street Journal, this trend may not resolve until we are well into 2022 and possibly 2023.

The principles of supply and demand have never been more evident than the static jump in pre-owned values.

YoY

CarGurus Index +29.94%

Body Styles

Wagon +15.76%

Hatchback +23.87%

Coupe +22.76%

SUV +26.26%

Pickup Trucks +36.70%

Van +25.59%

Crossovers +20.95%

Minivan +22.80%

Convertible +7.83%

Sedan +25.26%

https://www.cargurus.com/Cars/price-trends/

Cargurus is a leading online pre-owned vehicle search and price engine widely used by automotive dealers country-wide. It has become well established that if a dealer does not price the inventory competitively on the web, they will not be on the consumer shortlist before visiting a business. The established consumer pattern demonstrates that Cargurus data is credible as one of the most successful automotive inventory marketing companies in the United States.

Year over year Used cars values are up 29.94%, and used truck values are 36.70%. The only exception is specialty cars, like convertibles and other seasonal vehicles, where the sample is too small to measure during the summer months.

Recently a client's lease matured. The options at lease end were to ground it and walk away, trade it, or buy it at the preset residual value (buy option.) Factory lease programs are usually accurate with lease-end values due to years of data collection. In most occurrences, the vehicle's current values are close to the consumer's guaranteed buy-out option. The client's vehicle appraised at $5000 over the buy-out option, and they traded it in on a new car. They won due to the market forces at play, and you can win too.

What to do?

1. Estimate the value of your vehicle online by utilizing one of many tools like Kelly Blue Book's online tool, Carvana, Carmax, or have it appraised by a local dealer you trust. You will be shocked at the increased value.

2. Consider what type of vehicle you need and want and maximize your negotiation position. The automotive business needs your trade.

3. Do not pay over MSRP as some dealers are taking advantage of the new car supply issue and raising the price via an addendum sticker. The preferred dealer who wants your long-term business and trade will not participate in this short-sighted scheme.

4. Plan to be patient as you await the arrival of your new vehicle from the factory, as delays for delivery could be two to eight weeks as in-stock inventory is low. It will be worth it.

5. Do not worry, your current vehicle value and the new car purchase price will be locked in on the day of the transaction by the dealer.

6. If you are financing your vehicle, interest rates for automotive installment loans continue to be at an all-time low.

This author's opinion is time is of the essence since I believe we will see the most significant price increase to New vehicles in three decades, next year. The current inflationary index, global supply shortages, and the rapidly rising cost of materials support this outcome.

The spike in used car and truck valuations is unprecedented, and the time to take advantage of a seller's market for pre-owned vehicles and a buyer's market for new cars is here.

No one knows how long this grand opportunity will last, so if you are inclined to upgrade your transportation or choose a vehicle that will better meet your needs, now is your time to win and do it big.

When storms come our nature is to hunker down. This time it may well be worth your while to jump in and ride this one to your advantage.

Scott Wade has thirty-one years in the automotive retail industry as a successful General Manager, Dealer Partner, and Trainer with Import and Domestic franchises.