How to navigate buying a used or new car

Dearth of chips, supply chain problems affected car sales, prices

SEAN TONGSON

Antioch resident Ushean Fernando knew it was time to search for a new car. In November 2021, with his 2011 Toyota Sienna aging and accumulating a lot of miles, while he was increasingly frustrated and concerned with rising gas prices, Fernando soon ventured out to find a deal. Fernando desired a Toyota Hybrid Highlander, Honda Pilot, or a certified used car, but soon became frustrated for another reason.

“I was alarmed, but I didn’t buy at the time,” said Fernando, in reference to the rising prices of used cars. “Car prices skyrocketed. Then, it was jumping up $4,000, then $6,000, then $8,000; $52,000 became $56,000, and then I just gave up. Then people started to get the used cars. Why should I go for a used car when I could just buy a brand- new car? A lot of people don’t want to bargain with a used car.”

Fernando is one of the many consumers coming to grips with the reality of increased car prices as a result of a variety of different factors in today’s world. The prices of new cars have risen due to higher production costs, global supply chain problems, as well as a semiconductor (“chip”) shortage, which stalled new auto production, according to statistics from financial services company J.P. Morgan and data analytics firm J.D. Power. see Sales page 5B

Data from Auto Forecast Solutions says that when automakers scaled back on auto production in response to the COVID-19 pandemic, chip makers responded by switching gears and shifting shipment of chips to the consumer electronics industry. An estimated 18 million vehicles may be removed from production plans by the end of 2023 since the beginning of the chip shortage. As a result, the ensuing shortage of new cars increased demand for used cars, which, in turn, caused a surge in prices and a 30 percent increase above prepandemic levels as well.

Statistics show that U.S. consumers paid an average of $46,437 for a new vehicle in January 2023; a 4.2 percent increase from January 2022. This increase was on top of a jump of $8,500 from 2021, when the average price for a new vehicle was $37,876, according to Kelley Blue Book.

Eventually, Fernando said he bought a new Tesla, knowing he can get a better interest rate with a new car as opposed to a used car, in addition to saving on gas and having the luxury and comfort of having an electric car and being able to charge it at home.

“The only option for me was to buy a brand-new car,” said Fernando, adding that he has no regrets. “I already prepared my mind before I bought it. But each car is different in how you look at it. Anything you buy, you should buy to help you in your life.”

Bill Brandt Ford has been in Brentwood for the past 50 years. According to Dealer Principal Rob Brandt, supply has increased with 100 new vehicles; a significantly higher number than just 15 new vehicles a year ago, and monthly new vehicle sales are up 10 percent. Brandt added that while business has been improving with new car sales increasing and being stronger than it was a year ago and even from six to eight months ago, it still pales in comparison before 2020.

“Prices have gone up,” said Brandt. “Prior to 2020, you could always get what you wanted. It’s better than what it was, but not like what it used to be. Supply improves, then goes backwards for three months. It’s the nature of the business.”

Mike Bushel, Internet Manager of Winter Honda in Pittsburg, says business is slower than it was a couple of years ago when they had plenty of inventory, but still remains decent. Bushel added that manufacturers have increased their prices on the new cars due to high rate of inflation caused by COVID-19 pandemic-related and ensuing supply chain problems.

Due to lack of inventory, new car retailers have also increased their dealer markup on the new cars as well.

“Yes, financing has become more expensive due to the Federal Reserve increasing interest rates last year seven times and one time this year, so it adversely affected mortgage and auto loan interest rates significantly,” said Bushel. “People always need new or preowned vehicles, and we’re an established business doing service to the community for over 60 years in Pittsburg.”

Interest rates remain high with average interest rates increasing to 6.30 percent for a 60-month term on a new car and 6.27 percent for a 48-month term for a new car as of March 1, according to Bankrate.com. Interest rates for a 48-month loan on a used car and 36-month loan on a used car are 6.90 percent and 6.58 percent, respectively.

Due to more new cars being built and the production of more chips in 2023, prices are expected to decline by 10% for used cars and 2.5-5 percent for new cars, although there remains a degree of uncertainty of when or if prices will begin to decrease due to inflation.

“So far, we don’t have many new vehicles in stock and, thus, prices stay exorbitant,” added Bushel. “I don’t have any idea when we will have plenty of new cars from the Honda factory. This has been going on for two years in a row.”

Bushel advisies consumers to communicate with dealers. “That open channel of communications would allow the prospects to weed out bad dealers and select the professionals that they can trust to do business with,” he said.

Further information on vehicles for sale, vehicle ratings, pricing, and values can be found at https://www.jdpower. com or stop by Bill Brandt Ford at 8100 Brentwood Blvd. or call 925-634-3551.

Winter Honda is at 3850 Century Court, Pittsburg or call 925-232-0412.