Buying A Car In 2022 – What’s Changed?
February 14, 2022 • No Comment.
Buying a car in 2022 is very different to past years. A rise in demand, manufacturing closures, slowdowns and supply chain problems have hit the auto market particularly hard during the pandemic. The consequence for car buyers is low stock levels and soaring prices for new and used cars. Our customers tell us they are frustrated and find buying a car in 2022 stressful, time-consuming and expensive. Most understand the delays due to COVID and the impact on supply chains and the semi-conductor chip shortage. They don't appreciate not receiving accurate information from dealers and being promised a car and then finding it is no longer available or being dismissed by salespeople when they ask about better pricing. One of the benefits of using a car broker is reducing the stress of car buying. Read how here.
UNDERSTAND WHY CAR BUYING IN 2022 HAS CHANGEDTo understand why buying a car in 2022 has changed, we need to round up 2021 first. 2021 saw sales achieve the 1 million mark during the year, and expectations were high for the final year numbers. Disappointingly new-car sales slowed in the last three months of 2021, with December having the lowest increase since the Global Financial Crisis. Poor final quarter sales are related to supply chain issues and the ongoing semi-conductor microchip shortages. Buyers were frustrated with wait times, the lack of flexibility some dealers are showing on pricing, and some buyers distrust a few brands' new agency model. Car stock waiting times lead to many buyers deciding to wait and not purchase. A little more about that later.
New Car Sales January 2022In January, the trend continues with 75,863 new car sales for Australia, down 5% versus January 2021 (Year on year); this represents 2% fewer sales than the pre-COVID benchmark year 2019. Petrol vehicle sales were down (-12%) correspondingly Electric vehicle sales in January 2022 had the most significant increase ever with an increase of 109%, and PHEV sales following with (+94%) All States except TAS saw a decline in sales. Business sales are down 12%. Conversely, Private sales now make up 56% of sales as dealers continue to increase their margins significantly and play hardball with individuals on pricing. (Source; Vfacts )
What is going on with Car Prices?The answer is the simple economics of supply and demand. Fewer cars in the market and increasing demand has allowed some dealers to take advantage and not budge from the Recommended Retail Price. Whereas in the past, there was a ready supply of most car makes and models. Consequently, dealers compete for your business and adjust the price to get the sale. The microprocessor shortage and the COVID-19 pandemic's impact on supply chains have changed, with wait times for a new car anywhere from four months to eighteen months. As a result, additional pressure is on the used car market. Buyers who cannot get a new vehicle are buying a used car. Again, demand is more significant than supply, and over the last twelve months, we have seen prices for used vehicles increase across the board. Finally, we are seeing manufacturers increasing RRP for new vehicles. For example, Kia Australia has increased prices across all but two model lines for the new year by between $500 and $2000. Based on our industry experience, our view is that the supply of new vehicles bouncing back to pre-pandemic figures is unlikely until at least 2023, and it's likely to take even longer before it feels like a buyer's market for cars again. [caption id="attachment_397" align="aligncenter" width="366"] Five tips for buying a car with our 2022 checklist[/caption]
Buying A Car in 2022 ChecklistTo give you an advantage in this tight car market we, have put together our Buying A Car in 2022 Checklist to provide you with the edge.
1. Know Your BudgetKnowing your budget will ensure you do not look at cars you can't afford.
2. Research Which CarNeed vs Want, what to consider:
- How many seats & doors
- Automatic or Manual
- Petrol, Diesel, EV or Hybrid
- Two-wheel drive or four-wheel drive
- Make and Model
- Colours (exterior & interior/upholstery)
- New or Pre-owned
- Accessories, e.g. tow bar, roof racks, tint, etc.
3. Test DriveTest drive your desired car/s, limit your choices to three, and drive them consecutively. A test drive is an essential step in buying a car as it can expose issues with the vehicle that are not identifiable when sitting in the showroom. You don't have to commit to a dealer after a test drive; you can do your research!
4. Trade or Sell PrivatelyDo you want to trade a car, and is there a payout figure on your trade? When you trade a vehicle with the dealer, they give you their wholesale price. Contact your financier to determine your payout figure and the "valid until" date. Knowing your payout figure is important because sometimes, the wholesale offer is less than the payout on your loan. The payout figure is part of the calculation to arrive at the final cost of the new car.
5. NegotiatingWhether you are a good negotiator or it is your worst nightmare. Now is not the time to be slow in your decision making. Whether the vehicle you want is new or used, prestige or not, buying a car in 2022 requires a different strategy. The classic approach of waiting for holiday sales or EOFY specials no longer exists. The same goes for tactics like walking away from the salesperson's offer or emailing several dealerships, hoping one will give you a better price. Dealerships believe they hold all the cards and are confident that if you don't pay the price they are asking, another buyer will. With that in mind, it is critical to be;
- prepared to buy now,
- know the specification requirements you are after,
- have your financing is in order, and
- decide if you are trading your current car