By Owen Ryan, Staff Writer
Over the past year, both the new and used car markets have shifted dramatically towards higher prices and lower supply. In turn, it has created an extremely challenging environment for individuals looking to purchase a vehicle. Currently, not only is it almost impossible to find a good deal, but it’s even a challenge to find a fair deal.
According to the U.S. Bureau of Labor Statistics, the prices of used cars have risen by around 45%. For example, The average sale price for a nine-year-old car was $13,250 in June, which is a 30% jump in price from the year prior. At the same time, a five-year-old vehicle will cost a whopping $24,000, increasing more than $6,000 from a year ago.
The reason can mostly be attributed to simple economics — high demand with low supply, resulting in inflated prices. However, due to the close relation to the new car market, these economic stresses may be the result of a trickle-down effect from the greater problems in the new car market.
Daunted with obstacles of its own, the new car market has also struggled to meet the pressing worldwide demand. The supply of semiconductors, used in most common electrical devices like phones, appliances, gaming consoles, and yes, automobiles, has slowly fallen behind the demand. Mostly due to the lack of labor and production during the pandemic and also a severe drought in Taiwan, factories have struggled to keep their semiconductor production up.
During the peak of COVID-19, many of these chip manufacturing facilities had temporarily halted their production to slow the spread. All at the same time, the same “slow the spread” idea forced millions of people worldwide to upgrade their current electronics in order to effectively work from their homes.
Along with the pandemic, Taiwan, the world’s largest semiconductor producer, experienced a massive drought that stunted their already struggling production. According to The New York Times, one factory consumed over 63,000 tons of water every day in order to keep its factory running properly. This accounted for around 10% of the water supply held in two of its local reservoirs. During a time of massive drought, it is important to prioritize municipal water needs before industrial.
With the new trend of so-called “Eco-friendly” electric vehicles, there is also a massive increase in the number of semiconductors required to produce cars. While a typical gasoline-fueled vehicle may require 50-200 different semiconductors, some electric vehicles can require up to 3,000 different semiconductors.
Many well-known car companies have needed to take action in regards to their limited supply of semiconductors. These companies are left with a couple options. Some companies are choosing to cut back production on less profitable models, pin-pointing their focus strictly on building more profitable models like pickup trucks or four-wheel drive SUVs.
Other companies have decided to cut back on the amount of extra electrical components which may have been found in the previous year’s model. According to Consumer Reports, “General Motors, for example, is removing the fuel-saving cylinder deactivation feature from its full-sized trucks, and Nissan is putting the kibosh on navigation for the time being.”
All in all, if you’re considering purchasing a new vehicle, it may be wise to ride it out with your old vehicle or try to find a smaller, more compact model that has lower demand.
