Will Car Prices Increase in 2022?

The year 2021 has been quite the rollercoaster when it comes to car buying. In the past eight months, we’ve seen the prices for new cars increase due to the computer chip and inventory shortage, which ultimately led to used car prices increasing at a rapid rate as well. But can we expect car prices to increase in 2022?

How long will the chip shortage last?

Ford Dealership
Small cars are on display in front of the John Andrew Ford car dealership in Auckland, New Zealand. | (Photo by Smith Collection/Gado/Getty Images)

The first reason that the car prices are so sky high this year is the shortage of computer chips that resulted from the pandemic. Since cars use computer chips in many of their electronic systems, the short supply of them halted the production of new cars. In turn, the lack of new cars drove up prices on the ones sitting at dealer lots which, in turn, increased used car prices.

The Detroit Free Press reported that the chip shortage could last another six months in the short term, however, things could get better in the next 12 to 18 months. Although, that’s technically speculation since it is hard to tell what will happen given the rise in Covid-19 Delta variant cases in the U.S. If anything, new and used car pricing may stay the same going into the new year as some are doubtful that they will plummet.

Car prices won’t start to fall until automakers can find a fix

car dealership lot
Car signs Lease or Buy. Sign from car dealers around the Toronto area. | (Photo by David Cooper/Toronto Star via Getty Images)

While some outlets have reported that used car prices have fallen recently, that might be temporary. According to CNBC, automakers have struggled to keep up with production with the ongoing shortage of semiconductor chips. The news outlet reported that Ford cut its production in July and August and Nissan said that it expects to make half a million fewer vehicles this year.

Unless automakers can find a fix for their inventory shortages, we might not see prices fall anytime soon. However, used-car retailers continue to benefit from the elevated prices. Carmax saw an increase of 138.4% year over year and Carvana’s profits grew by 198%. With that much of an increase in profits, we wouldn’t blame those retailers for keeping prices where they are. Although, the market, in general, has a lot to do with it.

According to Ernie Garcia, the CEO of Carvana:

“What we’re finding out is that the OEMs have supply chains that are maybe a little more fragile than we all wish and they’ve got thousands of parts being manufactured globally and there are Covid waves popping up in different parts of the world so I think that makes it really hard to predict when that will normalize again.”

Can you still get a good deal on a new car?

While buying a new car right now might seem futile — given the inflated pricing and inventory shortages – don’t give up hope. “You can still find deals, it just takes patience and perseverance,” says Ray Shefska of YAA. Also, if the car that you’re looking for is not on any dealer lots, then you can always have it ordered straight from the factory. Just know that it can take some time for the car to get built and shipped though.

And while this roller coaster of a car market seems unpredictable, even as we head into 2022, it could be beneficial to wait. Here are five reasons that it could pay off to wait until next year to buy a car.

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