Why Are Cars Selling Over MSRP?
Car buyers are experiencing a unique situation in the market lately, cars selling over MSRP. It’s common to see people pay thousands of dollars over the Manufacturer Suggested Retail Price (MSRP) for a vehicle. It’s not something that happened before, so why is this happening now? Let’s explore the reasons behind it.
The Pandemic Effect
The COVID-19 pandemic has had an enormous impact on the auto industry. The shutdowns in 2020 led to a shortage of microchips, which are essential in the production of cars. Microchips are used in every component of the car, including the engine, safety features, and entertainment system. The shortage has reduced the availability of cars and production, leading to increased prices.
Increased Demand
Another factor is the increased demand for cars. People are looking to avoid public transport and have security in case of future lockdowns, which has shifted the market towards car ownership. Also, the pandemic led to low-interest rates, making it easier to finance a car, and people are using their savings on travel for buying a new car.
Dealer Profitability
The shortage of new cars has resulted in low inventory levels for dealerships. As a result, dealers are selling the cars they have at a premium price to make up for lost revenue. Customers who have their hearts set on a particular car have much less leverage when negotiating, leading to higher prices.
Conclusion
Car manufacturers are doing everything they can to catch up with the shortage by increasing production and investing in new factories. However, until the supply of microchips returns to pre-pandemic levels, customers will continue to pay more than MSRP for a car. In the end, the reason behind cars selling over MSRP is an unusual combination of events that created a perfect storm in the car industry.
