Apr. 17 – Consumers continue to pay far more than the manufacturer’s suggested retail price for new cars, and now the insurance required to drive them legally is also increasing as shortages of semiconductor chips and foreign conflicts continue.
Supply chain breaks and opportunities to lock in low interest rates on car loans have created insatiable demand for new vehicles over the past year, pushing the price of many used cars as high as new ones.
According to the latest data from the Consumer Price Index from the Office of Labor Statistics, in March, the prices of new vehicles increased by 12.5% on an annual basis.
In the Oklahoma City subway, the average new car costs 10.3%, almost $ 4,000, above MSRP, according to the car search engine iSeeCars. The price increase is ranked in the 12th highest position among the top 50 most densely populated areas of the metro.
Karl Brauer, executive analyst at iSeeCars, said that where cities are in this ranking depends on availability versus demand.
“You see the different types of vehicles that are popular in different areas, and then that has to be cross-checked with how much is available in those areas,” Brauer said.
Oklahomans who want to buy a new vehicle pay 24.5%, or about $ 8,800, over the MSRP for a Ford Mustang. The Jeep Wrangler Unlimited, Nissan Kick, Ford F-150 and Lexus RX 350 are also significantly higher than the MSRP.
The National Automobile Dealers Association reports that the lack of a chip has reduced dealership stocks to a low of 40 years. Brewer said Russia’s invasion of Ukraine was adding to the slowdown in the supply chain.
Brower said ongoing downtime and restrictions on movement in the Asia-Pacific region are limiting the chip’s production capacity. In addition, Ukraine is one of the leading suppliers of the neon component, a key component of a microchip.
The Volkswagen Group told the German publication Boersen-Zeitung that they expect the chip shortage to continue until 2024, and even then, there will be a structural under-supply.
While new car prices show no signs of falling, Normanites could soon begin to see cuts in used car prices, which fell 3.8% in March, according to the BLS. The price of used vehicles continues to rise by 36% year-on-year for the Oklahoma City subway area.
Brauer said that in order to see a multi-month drop in used car prices, more new car buyers would have to get into their next vehicle and then sell what they no longer need.
“We have a certain number of people who want to buy a car today, but that could be lower than it was two months ago,” Brewer said. “It takes us more than two months to call it a trend.”
Brauer estimates that car shortages will continue for 12-24 months until unfulfilled demand for new cars is met.
The constant increase in the price of the car affects the premiums
Challenges in the automotive industry affect the price of car insurance for consumers.
Normand-based Farmers Insurance agent Jonathan Quinonez said industry pressures are actually playing a role in raising insurance rates.
Quinonez said actuaries charge interest rates at a certain price, but due to shortages of vehicles, insurance companies are paying more than before for the estimated losses. This causes an increase of about 4% for those seeking a new policy with multiple providers.
“That’s all in general,” Quinonez said.
When Quinonez works with Normans, he tells them to look at the safety features of the vehicles they are shopping for, which may mean more discounts on their policy. The Insurance Institute for Highway Safety rates vehicles’ performance on tests and evaluates safety-related characteristics to apply a rating of poor, marginal, acceptable or good.
“I’ve seen where someone goes from a Dodge pickup to a Subaru [has the top IIHS rating]”And their insurance is literally halved,” Quinonez said.
Jeff Elkins covers business, living and community stories for The Transcript. Contact him at email@example.com or @ JeffElkins12 on Twitter.