Post COVID car-buying norms: High costs, low supplies

Since the outbreak of COVID-19 pandemic in early 2020 and its after-effects, purchasing a new or even used car has become a challenging endeavour for customers. The virus is a double whammy for both buyers and makers. Due to factory closures, supply chain issues, and a global shortage of semiconductor chips, car manufacturers are facing vehicle shortages and are forced to increase prices.

In addition to this, the sky-high fuel prices and rising interest rates are also making it difficult for customers to own a car.

Therefore, to understand the current car-buying climate and how to smartly navigate into the dealership to find bargains, discounts or even the car you want, here are a few things one should keep in mind:

Waiting may be longer than expected: Many people who wanted to buy a new car are facing lengthy delivery times of up to 2 years from both the manufacturer and the dealer’s end. This is mostly due to the chip shortage and supply issues from the manufacturing as well as parts suppliers end. According to experts, this crunch is likely to persist until 2024.

Despite setting up new semiconductor factories, which is already a complicated and expensive process that takes years, there is still another issue which is somewhat of a Catch-22. This means that due to the shortages of chips, constructing new chipmaking machines is also affected as they need chips to run.

Paying the asking price or more: With carmakers increasing the price of their cars twice or thrice a year, the good old days of finding exclusive discounts or bonus cash from manufacturers are now becoming a thing of the past. Nowadays, even for vehicles, which already have their updated versions in the market, one is more likely to see updated prices that have been already raised upwards than at which it was launched instead of a discount.

The new and raised prices of an older generation of vehicles could be Rs 1,000 and go north of Rs 1,00,000 for the high-end luxury vehicles. One may also notice that due to the higher inflation and overall industry effect, even dealer-installed accessories cost more.

Moreover, due to the supply crunch and lower supply than demand, customers don't have many options in negotiating prices because if one is not willing to pay the quoted price, there's a good chance that someone else will.

Limited options: Despite manufacturers claiming that inventory numbers will eventually normalise, consumers should get used to the new norms and probably start booking their choice of vehicle trims in advance. This could ultimately help avoid any last-minute confusion in conversation with the dealer, who would likely offer a surplus of choices which are already available to him.

Apart from this, automakers, who are already expected to be more conservative with their production numbers amid the parts and chips crunch, are attempting to shift some of their sales to build-to-order.

In addition, those who are looking for a certain colour or a specific trim of the vehicle are better off ordering in advance, as a special-ordered car can potentially take many months to arrive. In case, if one wants a new car in a short period, one should be flexible on colours, features or even the model itself.

Expensive loans: With the Reserve Bank of India increasing the repo rate to tame inflation, the cost of borrowing for retail and other loans by the banks may also go up. This could result in one having to pay higher EMIs and also higher interest rates on loans.

For example; if the interest rate is increased from 9 per cent to 10 per cent on an auto loan of Rs 7.50 lakh with a tenure of 7 years, the EMI would become costlier by Rs 400.

In today’s day and age, purchasing a new car could seem like a daunting task, however, if one is patient enough, does research, plan and order a vehicle in advance, they might still be able to find a great deal and move ahead of the curve.