You see, with the holiday cheers filling the air and Christmas time just right around the corner, many car enthusiasts, families, and individuals itching to go out on an adventure are considering the possibility of buying a new ride for themselves. And, given all the difficulties and challenges they have faced to reach this point, it almost feels poetic and ceremonial to reward their efforts and struggles with a gift that makes everything feel worthwhile.
However, despite the latest Ferrari Daytona SP3 causing car fanatics to drool at its beauty and encourage them to look at all the other upcoming vehicles waiting ahead, you might want to think twice about getting a new car in this volatile automotive market. And while some would argue that the car prices and opportunity costs can’t be that bad, we are smack down the center in a seller’s market that doesn’t make it a smart financial investment to buy anything that costs a lot anytime soon.
Car Prices Keep Climbing Up
To put things into context, it’s no surprise that the world markets and global economies aren’t doing too good once we consider that most industries are still reeling in from the damages and adversities brought about by the global pandemic. And, when we take some time to dig a little deeper, you can quickly point out that the automotive market has been taking hit after hit with absolutely no time to recover or recuperate from their losses. As a result, car prices have been steadily increasing, showing no signs of stopping soon.
- Supply Shortage Versus Rising Demand: Firstly, one of the most evident and directly attributable factors that reinforce today’s car prices and the state of the automotive market is the conflict between supply shortages and rising demand. As a result, people are fighting over what little inventory dealerships can provide, meaning they have no choice but to bump them up to have safety stock ready. Plus, production efficiency and access to materials aren’t looking too hot either.
- Global Chip Shortage Drags On: As mentioned above regarding production, the auto market isn’t only facing shortages in the cars themselves and the materials that go into making them. Specifically, the global chip shortage we met earlier in 2020 continues to drag on today and will realistically continue for some more years until supply constraints recover to a sustainable standard. And with electric vehicles becoming the norm, these chips are increasingly essential to manufacturing.
- Cost Constraints On Steel And Other Materials: Lastly, the automotive market is also facing cost constraints on other relevant materials to the production of vehicles that causes that lead to rising car prices. Specifically, steel prices have been sharply increasing recently, and even though analysts expected this momentum to blow over in proportion to lockdowns decreasing, the high prices remain unchanged. As a result, general uncertainty looms over the future of these supply chain disruptions, directly impacting the availability and pricing of both new and used cars in the market.
Consider Your Alternatives Instead
Of course, if you can’t help but scratch the itch of getting a new ride, there are plenty of alternatives for you to explore that can recreate the same feeling and benefits but do not require as big of a financial down payment. Namely, we recommend leasing a car instead of just outright saving your money and spending it on other things in the meantime.
- Leasing Isn’t Half Bad: Lease contracts work like magic for those who want to spice up their daily drivers but don’t necessarily want to tie up too much cash when they’re just testing the waters. As a result, your monthly recurring payments are a lot lower, and all you have to do is return the vehicle once the agreement is over. Plus, you can also exercise the option of buying the vehicle at a substantially lower price than market value.
- Nothing Wrong With A Bit Of Saving: Of course, there’s always the route of saving your money instead and spending your free cash flows on other things that can derive the same joy or provide just as much utility. For example, if you have plans to explore the wilderness and get together with some buddies, investing in camping gear, a food budget, and maybe even a reliable Can-Am ATV could make you happier than owning a new car. Furthermore, it’s not like that’s the last time you’ll ever use that equipment anyways.
You Might Want To Hold Off On Those Purchases First
Overall, given the whole pandemic situation and seller’s market state that the auto industry is busy dealing with today, we suggest that you postpone any plans for purchasing a new car for next year or the year after. And, while that verdict may sound sad and disappointing on paper, you’ll thank us when the time comes for actual purchase, and you don’t have to make do with any of the horrendous pricing available today.