Biz New Car Sales

A lone, unsold 2021 Venza sport utility vehicle sits in a near-empty lot at a Toyota dealership in Littleton, Colo. A microchip shortage for vehicles — it was created by factories closed by the coronavirus pandemic — has combined with pent-up demand, also fostered by the virus, to leave dealers’ lots devoid of new stock.

LENOX — Anyone in the market recently for a new or used — “pre-owned” is the preferred industry term — vehicle has been in for a rude awakening.

A severe shortage of computer chips, which power increasingly complex electronics, has forced automakers to slash production of new cars and trucks. A surge in demand for travel by car, and for vacation auto rentals, also has fueled massive dislocations in the supply chain.

The impact is dramatic nationally, and local dealerships are feeling the effects as well.

I’ve been approached to sell back my 2019 SUV, even though it has more than a year and $7,000 in payments due before the three-year lease ends.

Dealer lots in much of the country are conspicuously empty, and vehicles listed on websites as “in transit” are bought months before they arrive. In many respects, the demand for vehicles is as frenzied, and distorted, as the housing market.

Research company J.D. Power reports that the average transaction price in June for a new vehicle was $39,942, up 14 percent from the same month last year. The average cost for a used vehicle was $27,984.

A Kia dealership near Columbus, Ohio, reported 40 SUVs en route have already been pre-sold, prompting owner Rick Ricart to describe the market as “insane right now.”

The production logjam for semiconductors has caused General Motors to eliminate temporarily the stop-and-start feature that disables engines while cars wait at a red light. (Of course, some drivers wouldn’t miss that fuel-saving feature.)

One French automaker has substituted traditional analog speedometers for digital versions. (Good move, I imagine some of you may be thinking).

The bottom line: This appears to be the worst vehicle shortage since the end of World War II (my family was super-excited when they were able to buy a Pontiac sedan in 1947).

“All of what you thought you knew about car buying from last year, two years ago, six years ago, however long it’s been since you were in the market, has changed,” said Ivan Drury, an analyst for the car-shopping website Edmunds.com.

Here’s a stunner: The average transaction price for all vehicles with mileage between 100,000 and 109,999 sold at dealerships was $16,489 in June, a 31 percent year-over-year increase, according to Edmunds.

But, because of the chip shortage, if you’re looking to upgrade your ride, trying to negotiate a deal for below list price (or MSRP — Manufacturer’s Suggested Retail Price) may seem futile.

Not necessarily, says Gary Johnson, captain and chairman of Johnson Ford. He joined the family business in 1964, when it was a Lincoln-Mercury dealership.

“They’ll never take negotiation out of the car business,” he told me. “That goes back to the days of horses and carriages.”

Johnson acknowledges “a serious shortage” on his lot, normally filled with around 200 new vehicles but currently down to 30.

“There’s a surge in demand for everything,” he pointed out, citing a nationwide two-year wait for RVs (recreational vehicles) because so many people are keen for outdoor adventures.

Johnson is optimistic about a ramp-up in vehicle production in 2022. GlobalFoundries, a major semiconductor manufacturer, is preparing a $1 billion expansion of its existing chip plant in Malta, N.Y., south of Saratoga Springs, ahead of a planned second factory that could cost $10 billion.

Meanwhile, Johnson Ford’s pre-owned inventory is strong, as the dealership has purchased vehicles coming off short-term leases.

“The used-car market is very good, and it’s to the consumer’s advantage” thanks to the increased value of pre-owned trade-ins, the captain commented.

“I deal in 2- and 3-year-old models,” Johnson explained, especially certified vehicles that come with warranties covering six to seven years and mileage of 100,000 or more.

Johnson also cited widespread advance ordering from buyers, along with increased interest in the brand’s new F-150 “Lightning” electric trucks, as well as the return of the Ford Bronco SUV.

When it comes to this most unusual vehicle market, it’s tempting to resort once again to the mantra that some of us find so useful, courtesy of Mick Jagger and Keith Richards:

You can’t always get what you want

But if you try sometime you find

You get what you need.

Information from The New York Times and The Wall Street Journal was included in this commentary.

Clarence Fanto can be reached at cfanto@yahoo.com. The opinions expressed by columnists do not necessarily reflect the views of The Berkshire Eagle.