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Why Are Car Prices So High?
If you have looked into buying a new car in recent times, it is understandable if you have been a little shocked by the prices. The cost of cars has risen in the last few years due to a few factors and this is creating an issue for motorists that are looking to buy. Keep reading to learn all that you need to know about current car prices and what the future holds.
The Semiconductor Shortage
The primary reason that the cost of new cars has risen is the semiconductor shortage. Essentially, the manufacturers of the chips used in modern-day vehicles slowed production at the start of the pandemic, which has had a knock-on effect that brought vehicle production to a grinding halt. 70% of the world’s semiconductors are made by just 2 companies, so supply remains an issue now and is predicted to continue being a problem into 2023. This has been referred to as “chipaggedon” by industry insiders and is a primary reason why cars are now so expensive as supply is so short.
Other Factors
The global chip shortage and lack of supply is a primary reason why car prices are so high right now, but there are other factors as well. Parts and materials supplied by Russia and Ukraine have been impacted, which has further harmed production. There is also strong pent-up demand from the pandemic, so demand is high but supply is low. Interestingly, many people are turning to leasing new cars as a way to sidestep the rising costs and so that they do not have to wait a long time to drive a new car. Leasing is also a good option because motorists do not have to worry about depreciation.
The Outlook
So, what is the outlook for the auto industry? In the short term, it is unlikely that much is going to change with the global chip shortage predicted to last into 2023 along with the rising cost of living causing people to buy lower-priced used cars. It is also hard to predict with global events around the world impacting supply, but there are some reasons to be optimistic. Not all vehicle prices have skyrocketed and motorists may be able to get a good deal by shopping around or opting for a lease deal.
Any motorist looking to buy a new car might be in for a shock when they look at the car prices right now both new and used. The global chip shortage is the primary reason for this, which has created an imbalance between supply and demand. It is not a situation that is going to resolve overnight, but motorists may be able to find an affordable vehicle if they do their research and shop around.
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