Car Shortages Causes Sticker Shock

Image source: www.erieinsurance.com

Written by: Ethan Price

February 28th, 2022

At the beginning of 2020, little to no one paid above sticker price when going to buy a new car from their local dealership. However, a lot has changed since 2020. Just last month, 82% of customers who bought a car from a dealership overpaid for their new ride according to a consumer report by Edmunds. While this is extremely unfortunate for the consumer, its not necessarily the dealer's fault.

The United States has seen a massive supply chain backup dating back to the start of the Covid-19 lockdown period. Both the processes of building and transporting cars is currently slowed, specifically because of a global computer chip shortage.

Today, dealerships are not receiving enough cars to keep their lots full. In fact, many lots are close to empty. This car shortage has left many dealership owners with the moral dilemma of either overpricing the cars they do have, on the lot, to keep their business afloat or selling the cars for original sticker price and risk the possibility of their business going under if this car shortage lasts for any longer (WSJ).

Subsequently, a lot of consumers are actually skipping the dealership and using this opportunity to switch to an electric vehicle. Although it may be a small markup for an electric car, many consumers would rather pay the extra money in exchange for knowing the price upfront. Tesla has been at the forefront recently as they do not have any dealerships, but instead the customer can simply buy a car from a Tesla company store or online.

If the car shortage is not solved soon, smaller dealerships will only continue to face hardship while bigger dealerships will only markup their prices high.