Buying, selling or leasing a car? Act now amid vehicle shortages

If you’ve been thinking about selling your car, have a lease coming to an end or are looking for a set of new wheels, now is the time to act as the automobile industry deals with a global wide shortage.

There are a number of factors contributing to the so-called ‘car crunch’ but the biggest is manufacturing issues due to a shortage of semiconductor chips.

"We’ve seen shortages in certain production lines over time but we’ve never seen it across the board like this so this is definitely unprecedented," says Mazen Aboulhosn who is the general manager at Mercedes-Benz in Calgary and has been in the industry for 25 years.

You can see the shortage reflected in the downtown dealership’s fairly bare lot, and other dealerships right across the city.

"If you have a vehicle right now that you’re not using and it’s sitting in your garage collecting dust or maybe it might even have some sentimental value to it, the value you’re going to see for that vehicle today is nowhere near what you might see for it in the future. Definitely you’re coming into a peak market," he says.

A shortage of new and old vehicles translates to end-of-lease vehicles being worth a lot more as well.

Aboulhosn says people have lower mileage than expected due to the pandemic and says they might be in a good position to hand the keys back.

"We’ve seen those people return those vehicles at the end of the lease and the equity they recouped was nearly the amount they put forth in payments so it was definitely a massive win for those individuals and there’s a definitely a large need for those vehicles on the marketplace," he says.

BUYING NEW? PACK YOUR PATIENCE

You’re not out of luck if you’re looking for a fresh set of wheels, but it is recommend you plan ahead and be prepared to wait months to get it.

"For 50 years consumer have been able to go on the lot, pick the colour, and pick the vehicle and pretty much have the choice of several hundred vehicles on the lot. Today’s process is still smooth but takes a little more patience in terms of the choices folks make," said Huw Williams with the Canadian Automobile Dealers Association.

Maja Szlamp-Fryga’s lease was coming to an end in February and she landed on a RAV4 Hybrid but will have to wait eight months for its arrival.

“I started (looking) towards the end of January, I didn’t think it was going to be that difficult,” she said. “Be prepared to wait because they are very high in demand,” she warns other buyers.

Electric vehicles are in high demand and that is expected to increase even more with skyrocketing gas prices.

“I think what we’ll see is consumers are going to start to look at EVs as an option when they feel the pain at the pump,” says Williams. “So, I think you’re going to see a lot of consumers looking at different options”

Regardless what type of vehicle you choose, dealers said you shouldn’t expect to drive it off the lot the same day.

“Ideally we would have at the very least we’d have two times as many cars as we have right now. But given the current demand that we’re seeing right now we could definitely benefit from having four times the number of vehicles we have right now,” said Aboulhosn.

WHY THE SHORTAGE? HOW LONG WILL IT LAST?

Auto assembly lines right across the globe have seen production start and stop due to the semiconductor chip shortage.

It is due in large part to the pandemic because of production shutdowns as well as a surge in electronics as people worked and spent more time at home.

“What they couldn’t account for is the impact COVID was going to have,” said Gerry Duffy, a supply chain management instructor out of SAIT.

He says companies making the chips have ramped up production but it will take some time to see that and clear the backlog across all industries.

“We’re probably not going to see that for another two years, that meaningful increase in production in the market place so we’re left in the short term shortfall in terms of the supply of those types of commodities,” he said.

The auto industry is already seeing some gains and is optimistic they’ll see more inventory this year.

“The good news is the worst part of the shortages and 2020 and in 2021 are behind us in the rear view mirror and as we look forward to the future it looks like we’ll be out of the shortages and a more return to normal in the late spring, early summer of 2022, so (some time) this year,” said Williams.

Meaning if you’re on the fence about selling a used vehicle or returning your lease, you’ll want to act sooner rather than later.