The automotive industry is suffering a shortage that is fueling an increase in demand.
This cascading effect starts with a shortage of new vehicles and flows into a shortage of used cars for sale at dealerships. That shortage has evolved into inflation of used-car prices. The advertised price for the average used car in America hit a staggering $25,101, according to Cox Automotive, the parent company of Kelley Blue Book.
Kelley Blue Book reported that American customers bought 12% fewer cars this past June than they did last year. Used-car prices hit $20,000 in June of 2020 and have been steadily rising since then. There are currently about 2.45 million cars on dealership lots across the country.
Bob Loquercio Auto Group, headquartered in Streamwood, Illinois, has run car dealerships across northern Illinois for more than 25 years. The auto group currently has 11 dealerships in and around the Chicago area, specializing in Ford, Chrysler, Dodge, Jeep, Ram, Genesis, Honda, Toyota, Kia and Hyundai new cars -- and with every new car dealership comes an extensive used car lot.
Like dealerships across the country, they are scrambling to gain used-car inventory to sell to Chicago-area customers who are eager to buy.
The new-car inventory has been affected by a global shortage in microchips, due in part to the pandemic-related closure of factories. The new-car shortage has resulted in increased demand for used cars, which has translated into a shortage of used cars and higher prices paid by dealerships for those vehicles.
The higher cost of goods translates into a higher price for customers. Bob Loquercio Auto Group is feeling the pinch, along with virtually every dealership or auto group in America.
Alex Yurchenko, senior vice president of data science for Black Book Vehicle Pricing, told AutoWeek in late June, “Well, it’s economy 101, supply and demand. We have elevated demand and short supply. Because of the chip shortage, there’s a shortage of new inventory. We still don’t see it in sales numbers. If you look at May, April, March, they’re healthy 2019 levels — so pre-pandemic. But what’s happening is that dealers are just selling off their inventory. Available inventory is just dropping fast, every single day.”
For Bob Loquercio Auto Group and other dealerships nationwide, it means scrambling to obtain cars to fulfill customer demand, regardless of price.
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