A whopping 87 million Americans are planning on car shopping this Labor Day weekend, according to a WalletHub survey. Many might be disappointed by the selection available at dealerships, though: A global shortage of semiconductor chips has led to a scarcity of cars on the market.
Though August is historically a good month for auto sales, the lack of inventory is putting a significant dent in profits. Ford Motor's vehicle sales for the month plummeted 33.1% compared to what they were last year, primarily due to a lack of supply.
If you're looking for a new car, expect to see fewer options and higher prices. The average price of a new car climbed to $42,832 in July, according to automotive resource site Edmunds.
Another option is to buy used. Pre-owned cars experienced a 21% price jump during the second quarter of 2021, but still, the average one costs almost $20,000 less than a new one.
Video by Jason Armesto
If you're in the market for a used car, experts recommend expanding your shopping radius to nearby counties to see if there are better deals, and taking advantage of elevated used car prices to negotiate a better trade-in value.
Leasing has also been more popular during the pandemic, and its monthly costs are typically much lower than buying and financing. The average auto loan payment for a new car is $575 per month, according to Experian's 2021 State of the Automotive Finance Market report, but the average lease payment for a new vehicle is at $466 a month.
However, buying is often a better long-term decision, experts say, as you won't have mileage caps or other restrictions that come with leasing, and at the end of your loan payment the car will be yours.
Here are four ways to score a deal on a used car:
Experts agree that the larger the radius, the more options you'll have to choose from. This is especially true if you live in a small town. A nearby, larger city might have a dealership with more inventory and therefore more wiggle room on pricing.
However, don't venture too far, Matt DeLorenzo, senior managing editor for Kelley Blue Book, told Grow. "Once you do that, you'll incur additional costs in getting your car home either by driving it yourself with overnight stays or shipping it, either of which could eat up any savings realized," he said.
The average price of a used car was $21,558 in July. If you are being charged more, that might be a red flag.
Because used car prices are so high, you might be able to sell your current car for more money.
"Car shoppers are experiencing an interesting dynamic right now, because local dealerships may pay more for a popular vehicle this year than in years past," Matt Smith, deputy editor of CarGurus.com, told CNBC. For example, a Dodge Charger could get you $11,800, and a Nissan Altima could $6,200.
Dealerships aren't the only places to find pre-owned vehicles. Online platforms like CarMax and Carvana have a wide variety of cars at various price points. You can even have the car shipped to you, which cuts out the need to visit a dealership altogether.
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