Inflation in the Automotive Industry

Soaring prices have had debilitating effects on the auto industry. With inflation at an all-time high, prices across the automotive sector have increased dramatically. Analysts project that the average price of gasoline in the United States may reach record prices very soon. Prices of both new and used cars have also skyrocketed, so much so that more and more buyers are being priced out of the market every day. The average price of a used vehicle in the United States in November 2021 was $29,011, an approximate 39% increase from just 12 months prior. Over half of American households have less income than is considered necessary to purchase a used vehicle with these price tags. Even fewer can reasonably purchase a new car in todays market. The average price for a new vehicle is now towards $46,000. The overall cost of consumer goods and services continues to rise as a result of supply chain disruption that began with the onset of the pandemic.

Supply Chain Disruption

Supply chain disruption is resulting in low supplies, reduced production, component shortages and other issues. Although auto makers have began to restore some production, increasing manufacturing proved difficult amidst component delays and shortages. In particular, the semiconductor shortage is at the center of auto price hikes. Chip makers abroad have not been able to respond to such high demand. Since semiconductor chips are essential components of new automobiles, these shortages are only reducing the production of new vehicles even further, which is propelling used and new car prices to record levels. 

Low supplies of vehicles directly result in rising prices. Not only is the availability of new vehicles limited, but dealers are also having trouble acquiring used cars. Used cars are often vehicles turned in from leases and trade-ins or sold via rental companies; however, these sources have all but dried up. Since there arent many new cars, lessees with expiring leases are choosing to buy their used cars instead of leasing or purchasing new ones. New vehicle dealerships across the country have about 1 million vehicles available nationally, which is about one-third of the typical supply. 

What Does This Mean for Consumers?

Rising costs are leaving consumers to pay a hefty premium, well over the original MSRP. And most experts say that this is unlikely to change any time soon. Auto manufacturers are far from fully restoring their production as inflation reaches a forty-year high of 7%. It also appears unlikely that supply chain disruption and component shortages will be resolved in the immediate future. Fortunately for consumers, there are some actions one can take to save as much money as possible in todays market. 

Used Car Purchase Steps

There are several things you should know before purchasing a used car. Always make sure to purchase used vehicles with written warranties. Should your car turn out to be a lemon and you have a warranty, you could qualify for a lemon law case which could give you a refund, cash compensation, or a replacement vehicle. Remember to present your car for warranty repair work if you do experience problems. To avoid buying lemons altogether, you should always do plenty of research before purchasing used or new cars. This includes running a CarFax report when purchasing used vehicles. Regarding new vehicles, you should check and make sure there arent active recalls or numerous complaints about the new car that youre interested in buying. Please note that private sellers and out-of-state purchases are not covered under the California Lemon Law. 

Taking these steps will ensure that you are purchasing a car that will not end up costing you several thousand dollars over its ticket price in repairs. If that does happen, consult with a lemon law attorney as soon as possible. Ending up with a defective car today is far more costly than it was just years ago as everything from car repairs to gasoline has increased in price. With rising inflation, it is now more important than ever to do extensive research before purchasing a new or used vehicle in todays market. The key is prevention. Always gather as much information as possible before making significant purchases such as leasing or buying a car. 

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