Car sales are always a very good indication of the state of the economy, and concerns have been raised about the lackluster numbers reported by dealerships. While there were 1% more vehicles sold in January 2022 than in the same month in 2021, the total sales were still more than 18% lower than in January 2020, and 29% lower than a peak benchmark set in January 2008.
The reason for this is two-fold. There does remain a lack of consumer confidence in the economy as residents are squeezed by skyrocketing inflation, rising taxes, expensive grocery costs, and simply outrageous prices at the gas pumps. But, the main reason people are not buying cars is because of a global-wide shortage of new vehicles on the market due to manufacturing issues.
CTV News reports that the pandemic caused several pauses in the production of semiconductor microchips, which help improve the efficiency of engines and work to lower emissions. There have also been several interruptions in the complex supply chain of semiconductor microchips, which has suppliers in Europe, Japan, and the United States. More complicated vehicles, such as electric cars, require several semiconductor microchips to run, and semiconductor microchips are also used in cell phones, televisions, computers, games, and home appliances, for which demand rose exponentially over the pandemic as people abided by stay-at-home orders. So, as fewer semiconductor microchips were being produced, the need for them grew greatly, and there is now such a severe shortage that experts believe it may not be until 2023 that things get sorted out. Chipmakers are slowly managing to increase their capacity and automakers are beginning to design vehicles with fewer semiconductor microchips, making use of higher-tech wafers that are more easily found.
If you are in the market for a new vehicle now and are looking at a particular make and model, it could take several months for it to become available. CTV News tells the story of one buyer who was told it would be at least eight months before their choice of car will be ready for them. If you are looking to buy a new car, keep in mind you may need to have a back-up plan if you are also getting rid of your current vehicle.
Owners of underused vehicles could cash in
For those who happen to have an underused vehicle they are not using much, now is the time to take action. Folks selling their vehicles are finding they are getting a lot more for them than they would have pre-pandemic, especially if they are in good shape and with relatively low mileage. If you happen to have an “extra” vehicle that is not needed, now is a great time to clean it up, take some pics, and post it to the Internet. Be sure you know what it is worth first, however. Cross-compare your vehicle against others that are similar online and consult the Kelley Blue Book and Canadian Black Book. You can even shop around at dealerships that take used vehicles to see which one will give you the best price. Be patient, as vehicles are in such high demand right that that you can afford to take your time and do some comprehensive research.
For those who lease, if your term is coming to an end you may also be coming into a minor financial windfall. CTV News reports that those whose leases are nearly up are managing to recoup nearly as much back as they put into payments, especially if they did not drive as much as usual.
What’s better, new or used?
Buying a new or used vehicle is largely based on both personal preference and finances, and there are definitely pluses and minuses to both options. New vehicles come with cutting-edge technology that is making driving safer than ever, plus comprehensive warranties that can ease your worries of having to take on expensive repairs early on in your ownership. A new car is great, but unfortunately there is truth to the old adage that it will lose value the moment you drive it off the lot. According to the Canadian Black Book, new vehicles depreciate from around 30 to 40% during the first year of ownership. Many lose less and some lose more, but there’s no getting around that if you wanted to sell your new car shortly after you bought it you would almost certainly lose a fair amount of money.
Used vehicles are definitely far more economical, but also come with more risks. There is really no guarantee how well they will operate. As they are older, the need for repairs can happen often and can be extensive. Only shop at reputable used car dealerships that carry out thorough diagnostics on their vehicles and that are able to give you a good idea of the shape of the vehicle. Also, be very careful to ensure there isn’t a lien on the car, as liens follow the vehicle, not the owner.
Looking for a car? Talk to us at Lane’s
If you have been shopping for a new vehicle and think you have spotted the one that you want, give an experienced car insurance brokerage a call. We have several options available from a number of different providers and can give you an initial quote. If you are torn between a few different types, it may be the difference in the cost of car insurance that helps you make up your mind.
As we work for you, not the insurance companies, we are your ally in the insurance business. It’s our job to find you the best car insurance coverage at the lowest possible rates out there. Give us a call at our Calgary, Banff, Edmonton, or greater Alberta offices.