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How Inventory Is Affecting Vehicle Prices In 2021


Shopping for your dream car? You may have noticed that your experience is a lot different than it was in years past. If finding the car you want seems more competitive, it’s not just your imagination. Recent market conditions have changed the landscape for both buyers and sellers. Here’s what you need to know, and how you can plan ahead for the future. 
Selling Cars


The price you pay for a car changes all the time, and for all kinds of reasons. At the moment, supply is low and demand is high. Dealerships across the country can’t replenish their lots fast enough, increasing scarcity across the board for just about every automaker. When that happens, cars are sold for more than usual. So, if you’re looking to buy a popular vehicle, you may have to pay above the MSRP (Manufacturer’s Suggested Retail Price).

So what’s behind this vehicle inventory crunch? The culprit is a global shortage of microchips, reducing the supply of video game consoles and smartphones. And now, it’s taken full hold of the automotive industry. All modern cars use computer chips in some capacity, no matter how advanced they are. Even if it doesn’t have self-driving capabilities, a computer is still used to operate things like keyless entry, automatic climate control and even the stereo.

COVID-19 affected the supply chain for all kinds of products. In the beginning, it increased demand for office technology and reduced demand for cars. But as more drivers continue to get back on the road, the demand for cars has followed suit. Currently there aren’t enough microchips allocated for automakers, reducing the number of vehicles that can be produced at the factory. And with fewer cars available, the more buyers are willing to pay for them.
Car View


Inventory has been cut in half, causing vehicles to spend two weeks less time sitting on the lot. Couple that with high demand over these last few months, and you’ve got the recipe for a seller’s market. If you’re looking to buy a new car, you’ll have a harder time finding the specific color and trim you’re looking for. Interest rates may be low, but you won’t see the same discounts and incentives that you might otherwise expect.

To be clear, dealers are not trying to take advantage of the current situation. Increased sale prices are a response to market conditions, just as the beginning of the pandemic led to unprecedented deals due to low demand. To put it in perspective, around one in five vehicles sold for over MSRP during May 2021.

If you’re looking for a great deal on a new car this year, you may have to exercise a little patience. Depending on where you live, there’s a chance you’ll have to visit dealerships outside of your local neighborhood. Don’t need a vehicle right away, or looking for something specific? You can ask the dealership to let you know when the car you want is back in stock.


Used cars have also seen a meteoric rise in value, as a perfect storm of shifting lifestyles and stimulus checks helped drive up demand. Many new-car shoppers have also had to expand their options due to inventory issues, making it more competitive to buy a used or certified pre-owned vehicle. And as long as production issues continue, you can expect used cars to be priced higher than usual.

Just like new cars, used cars are spending less time on the lot and on online listings. When you see a car you like, you may want to act quickly. A vehicle in good condition and with low mileage can go faster than you expect, especially if it’s a popular or rare model.

Used car prices may be higher right now, but there’s also a silver lining. If you need extra cash or find another car you like, it’s a great time to sell or trade in your vehicle. At the moment, the average trade-in value is 49% higher than May 2020.


In the short term, you may have to be more patient when buying a car. Dealerships are doing their best to meet demand, and everyone is dealing with limited inventory. The market is even affecting car rental companies, which also purchase vehicles as part of their fleet inventory. It’s something to keep in mind as you plan your next vacation, especially as travel and tourism picks up again.

Nobody knows exactly when vehicle production will stabilize. With the global microchip shortage in full effect, it may take months before supply catches up with demand. But while it may be harder to buy a new or used car in 2021, the situation will improve sooner or later. And if you have a vehicle you don’t need at the moment, there’s never been a better time to see what your used car is worth.

This content was created in partnership with TrueCar. Statistics featured in this article are based on data available to TrueCar as of 6/2/2021. Average pricing and inventory levels are subject to change without notice, and individual vehicle prices may vary by factors such as location, individual vehicle attributes, and dealer.