EASTHAMPTON — Before the pandemic, when the owners of Nicky D’s car dealership heard that their manager sold 11 cars in one day, it would have been cause for celebration. But when co-owner Betty Duprey and her husband heard that number one day last week, a wave of stress came over them.
“Nicky and I both went, ‘Oh God, you sold that many?’ Because that’s the amount we have to replenish in a very short period of time,” Duprey said.
Restocking cars is proving difficult right now for the Northampton Street dealership. That’s because the supply of vehicles is dwindling at the same time as demand is going up.
Karl Brauer, executive analyst of iSeeCars.com, said that with fewer cars being manufactured, new and used cars are a scarcer commodity, making them more expensive for both customers and dealerships to obtain.
In June, the website reported that used car prices increased by 27.1%, or $5,590, in Springfield over the last year.
“Most time we see an increase of less than a percentage,” Brauer said.
The shortage of new and used cars is an unexpected complication of the COVID-19 pandemic. Cars rely on semiconductor chips to send information through the vehicle. The production of these chips slowed down in spring 2020 as factories were forced to reduce staff or stop production entirely during the height of the pandemic.
Because semiconductor chips are a vital part of many electronics, car manufacturers found themselves facing stark competition for the resource. Demand for technology including laptops, tablets and game consoles skyrocketed last year as many jobs went remote and people searched for ways to entertain themselves while stuck inside. At the same time, global motor vehicle production fell by over 15% from 2019 to 2020, according to Statista Research Department, a market and consumer data firm.
The car shortage comes at a time when there is also increased demand. Brauer said more people are in the market for a car because they shifted their lifestyles as a result of the pandemic. As more jobs become virtual, some people are moving out of urban areas.
“If you move out of the city, you have to have a car,” Brauer said.
Brauer also attributed the demand to people’s unwillingness to use public transportation. He said that the crowded nature of buses and subways can be stressful for those concerned about contracting COVID-19.
Jack Davey, owner of Pleasant Journey Used Cars in Northampton, has had to adjust to the changing market. Typically, he aims to keep his prices below $20,000 and have some cars available below $10,000.
“Now, it’s tough to meet those price points,” he said. “I don’t think I’ve ever seen car prices accelerate so much in such a short period of time.”
Carla Cosenzi, the president of TommyCar Auto Group, which operates five dealerships in the Valley, says her inventory is only about a quarter of what it usually is.
“Since I’ve been in business, I’ve never seen inventory so low,” she said.
With the limited supply coming from manufacturers, Cosenzi has had to turn to acquiring more used cars through trade-ins and purchases from former customers. All of her dealerships sell both new and used vehicles. Cosenzi says that trade-in values are much higher than usual.
“I think it’s a great time for consumers in that respect,” she said, although while customers are getting more money for their used cars, replacing them is also more expensive.
Melissa Mills-Dick, an employee at a local college, put off buying a car at the beginning of the pandemic because everything was remote. Now, as life returns to normal, she wishes she had bought one earlier.
“If we were able to see into the future and know that it was going to get so expensive, we probably would have done it six months ago,” Mills-Dick said. “We sort of just had to accept the prices being higher.”
Mills-Dick bought a slightly newer car than she had planned to because “prices were so high that it was worth getting a little bit nicer of a car,” she said.
Similarly to Duprey, Davey has had to dedicate more time to replenishing his stock of cars after making sales. He now spends over half of his day buying cars from online auctions in an effort to maintain his inventory.
While cars have been harder to buy, they also can be difficult to sell because of the rise in prices, despite high demand. In a typical year, Nicky D’s sells around 80 cars per month. This past June, the dealership only sold 58, and only an estimated 48 for July. Even that number of sales was a challenge for the couple.
“It took some serious hustling on our part,” Duprey said.
Davey’s customers have been understanding about the price increases, but many, unable to afford higher monthly payments, have opted to repair their old cars instead of replacing them.
“Now is not the time to make those big changes in your life, really,” Duprey said. “It’s a terrible thing to say as a business owner,” she joked.
But even repairing a car presents its own set of challenges. One of Duprey’s customers has been without her car for four months because Nicky D’s has been waiting for a seat belt sensor since May.
“Those integral parts to make that vehicle operational and safe are drying up,” Duprey said. “Nothing is coming out of China or Japan.”
Brauer expects the shortage to level out in the beginning of 2022, based on his research.
“In January and February there is usually a drop-off in demand, and hopefully by then they will also be manufacturing more chips,” he said.
Cosenzi said that she expects inventory levels to return to normal as soon as September or October.
Until then, Davey plans to continue to take it one day at a time and “roll with the punches.”