As American car shoppers head into one of the biggest car-shopping weekends of the year, they expect to see fewer choices and to pay more for a new car. Still, they’re planning to buy anyway.
A new study from Kelley Blue Book’s industry intelligence team shows that car shoppers are aware of the global microchip shortage and its likely impact on their shopping experience…but they’re not deterred.
“The global shortage of microchips is one of the top stories right now in the automobile business, and if you are a consumer looking for a new vehicle, you don’t have to search hard to see the reports,” notes KBB Senior industry Intelligence Manager Vanessa Ton. “Shoppers are expecting high prices and limited choices, and that’s exactly what they are finding.”
Sales Rate Highest in Decades
Researchers surveyed shoppers during the final week of April. The seasonally adjusted annual rate of sales last month was the highest seen since studies began in 1976.
Among the insights:
- Three out of four car shoppers are familiar with the global microchip shortage and its impact on car sales
- Nearly 60% of buyers expect to find lower incentives
- 42% of in-market consumers expect to pay over sticker price for a new vehicle
- Despite conditions, more than 60% of consumers are not planning on delaying their vehicle purchase
Shoppers Willing to Pay More
Americans are aware that demand for cars is rising even as supply is falling. As many as 73% of the respondents said they expect to find higher prices than they would see in a normal market. Perhaps the most surprising number in the survey showed that those who expect to pay over sticker price are willing to accept a 12% premium.
The average MSRP for a new vehicle in April stood at $41,950, meaning those consumers willing to pay a premium expected to spend $5,000 over sticker price.
High Prices Don’t Mean Smaller Cars
Higher prices were not leading many consumers to consider smaller or less-expensive vehicles. Even with higher prices, truck buyers are truck buyers, and midsize SUV shoppers don’t appear open to something smaller. The study found that 81% of shoppers were staying within their intended segment. Only 19% would consider buying a vehicle from another category.
Going into Memorial Day sales weekend, only 37% of in-market shoppers say higher prices and lower incentives would likely delay their purchase. Of those willing to wait, 70% expect to sit out the market for three months or more.
But most expect to push ahead with a purchase, even in a difficult market.
Consumers in Buy-Now Mode for Memorial Day
“Consumers are clearly in buy-now mode,” adds Ton, “likely fearing even less choice and higher prices in the months ahead. The new vehicle market, like the housing market, is very competitive. Heading to Memorial Day weekend and the start of summer, when popular SUVs and pickups are in high demand, it will only get more competitive in the near term.”
At the end of April, new vehicle inventory on dealership lots across the U.S. was less than 2 million units, down 42% from April 2020.
More: KBB’s 10 Best Deals of the Month
