The auto industry has seen unprecedented change in the last year. Between disrupted supply lines, COVID shutdowns and freak factory fires, it’s no surprise that car supply is at record low while prices skyrocket. So, in this crazy new world, how can you A) find the car you want and B) get the best price for it?
PART I: What’s going on in the 2021 car market?
First, you have to understand the lay of the land and the factors contributing to the supply shortage. This way you can better understand where the market is at, and how to ‘work it’ to your advantage.
To this end, we’re answering some of the most pressing questions on every Aussie’s mind going into the 2021 EOFY:
Q1: Why is there a car shortage and when will it end?
It’s no secret that car supplies are lower than they’ve been in decades. We’ve got a number of untimely coincidences to thank for this – yes, the universe really is conspiring against would-be car owners this year.
As with almost everything this past year, the shifts in the automotive industry can be traced back to COVID. As the pandemic spread, factories shut down, borders closed, supply chains were severed, and global trade wound down to a slow trickle.
Meanwhile, the whole population was locked up at home, twiddling our thumbs, saving for The Great Unknown and dreaming of the day we can re-enter The Great Outside. With nothing better to do with the money burning holes in our pockets, we of course turned to online shopping. In particular, computers, game consoles, tablets, appliances… everything to work and entertain ourselves at home. What do all these things have in common? Semiconductor chips – which also happens to be a critical component in cars.
This meant that when the world started reopening and the car industry started gearing back up around September, they had already lost their place in the chip manufacturing queue, pushes car manufacturing timelines back by months.
To top it all off, the February earthquake that destroyed the Hitachi suspension factory and two semiconductor factory fires in October and March meant auto parts got even scarcer. All these factors sent tidal waves across the car industry, and no brand was left unaffected as the manufacturing wait continued to grow longer and longer.
So, if you’re wondering why you’re having such a hard time finding the car you want, you’re not alone. Unfortunately, car inventory levels are unlikely to return to normal for at least a year, possibly longer. That’s why we’re giving you the upper leg with our expert industry tips on car sourcing in the current market… keep reading!
Q2: Why are cars so expensive in Australia?
With Australia cut off from the world and states isolated from each other, the captive population – in true Aussie spirit – turned to the great outdoors. Road trips experienced a renaissance of popularity and camping became the not-so-new ‘it’ thing. As a result, car sales, in particular for 4WDs, went through the roof.
This double whammy of low supply and high demand means that there simply isn’t enough stock around to fill all the orders coming in, much less spare stock lying around screaming for that red sale sticker. As a result, dealers who are offering discounts are few and far between.
But that doesn’t mean no discount is to be had – you just need to know the right things to do… coming right up in the next section!
Q3: Are used car prices going down?
You might be thinking, “well, if new cars are so hard to find because of manufacturing delays, why don’t I just buy a used car and save myself a few bucks too?”
Good idea! Except that everyone else also had the same idea.
As a result, used car prices are at an all time high. That old saying that your car loses 15% of its value the second you drive it off the lot? That’s no longer true. In fact, this is the only time in history where you can buy a new car, turn around, and sell it for more than you paid. You read that right – there are used cars being sold at higher prices than the full retail price of brand-new cars. Unfortunately, until the new car inventory shortage we are experienc is resolved, used car prices are unlikely to go down
PART II: 6 tips to getting the best EOFY car deal in 2021
So, in this upside down world, what can we do to regain control and drive away with a great car deal this EOFY?
Here are the top 6 tips collected from our car buying experts on how to find the car you want and get the best deal.
Tip 1: Do your homework
Those who are better prepared get a better deal, 100% of the time. Seeing as you’re reading this guide, you’re off to a flying start!
Understanding the current market, especially given today’s unique environment, is critical to getting a better deal. So if you skipped past PART I: What’s going on in the 2021 car market, we would highly recommend going back and reading it for an up-to-date understanding of where the market is at and what your options are.
Tip 2: Consider higher variants of your car
With the limited supply of cars and the long factory wait times, the reality is you might be waiting a while for your new car. However, if you can afford to broaden your search to include higher variants of the car/s you want, you may have more luck finding one that is available immediately.
Higher variants generally have better availability, and as a result, the added perk of being more likely to be discounted. Especially with EOFY coming up, it’s a good time to opt for an upgrade and a better discount!
Tip 3: Understand your factory order options
If you’ve got a hole in your heart the shape of a 2021 Toyota RAV4 GXL Hybrid AWD that nothing else can fill and you’re happy to wait, then go for a factory order. Note the current wait time can vary from 3 to 12 months, depending on what car and model you select.
The good news is, you can generally get better discounts on factory orders than on in-stock options, which might make the wait time more palatable.
Before you make your decision though, just be aware that the actual wait time could be much longer than the advertised wait time.
This is because the published wait time is generally based on the wait at the time of announcement. This means that by the time you put in your order, there’s likely to be a long list of new orders before yours. As such, the delivery time for your car will usually end up being much longer than the quoted estimate.
Take this into consideration when deciding whether to opt for a factory order, and adjust your expectations so that you’re not disappointed when your car arrives ‘late’.
With the supply shortage and high demand we are seeing this year, it’s more important than ever to get your car financing organised before you start shopping. This way, you will have the maximum buying power from the get-go and won’t risk missing out on a great deal or a rare opportunity to grab the perfect car.
If you’re looking to trade-in your existing car, make sure any repairs which will affect the value are done prior to inspection. Research how much your car is worth prior to going to the dealership, to make sure the quote lines up with what you expect.
Otherwise, or take another route to sell – in the current market of inflated used car prices, you may get better results with a private sale.
Tip 6: Engage a car broker for better options and better prices
Car brokers and car buying services have in-depth industry knowledge, wider reach, greater access, more buying power, and the industry relationships needed to source that hard-to-find car and negotiate you a better price.
In the current market, this access can make all the difference between being able to find your dream car… or not.
Speaking to a good car broker will also help you get a better understanding of the lay of the land, so you make informed decisions and get the best result this EOFY.
Zaheer is the Founder and CEO of CarClarity, Australia’s first true car loan platform with an easy online application process. Zaheer has over 14 years of experience in senior management and executive positions within the financial space. He founded CarClarity in 2019 to address the unfair gap and lack of transparency he observed in the car financing market, where traditional lenders were commonly placing profit margins over customer outcomes. Zaheer is also an avid car enthusiast who has owned 10 cars in as many years. His passion for cars combined with his industry knowledge provides a unique insight into the car buying and financing space.
Buying your first car is a milestone within a young driver's life. A number of life lessons are thrust upon you and for many this may be the first significant purchase you make. Read our first car buyer's guide to get started.