Global Chip Shortage Makes It Tough to Buy Certain Cars

CR offers expert advice on how to navigate the current car shortage

Ford

Buying a car right now—whether new or used—is more difficult than usual. Quite simply, there aren’t enough cars to meet rising demand.

So you have three choices: look at models you weren’t previously considering, hold off on buying, or fix your old car if it’s in rough shape.

Jake Fisher, director of Consumer Reports’ Auto Test Center, recommends holding off until the market has shifted in the buyer’s favor. “Now is a terrible time to buy a car, so it’s probably best to avoid it if you can,” he says.

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The global semiconductor shortage, which is affecting production of everything from portable electronic devices to cars, is likely to last at least another year, analysts say.

But Sam Abuelsamid, an analyst at Guidehouse Insights, which tracks the automotive industry, says there should be more chips available in the coming months, which should ease production delays and inventory shortages.

For the time being, CR has a few tips to help you navigate the challenging market.

If you’re shopping for a new car because your old one has mechanical problems, Fisher suggests getting your old car fixed. In general, he says, it’s better to avoid a situation where you have to buy a new car because the old one is falling apart. Not only is the supply of new and used cars limited, but prices for both are higher than usual.

Still, if you have to buy a car, Fisher says to look at models that aren’t in high demand—basically, ones that aren’t all-wheel-drive SUVs and pickup trucks.

There’s a range of CR-recommended models that aren’t best sellers, so you can probably find deals on sedans and two-wheel-drive SUVs. You can also look at cars that are similar to high-demand models.

If you can’t lay your hands on a Kia Telluride, for example, take a look at the very similar Hyundai Palisade or Toyota Highlander, Fisher says. CR recommends calling several dealers to ask what they have deals on. The answers may surprise you.

“The car shortage isn’t affecting every model the same way, so consumers can take advantage of the forgotten corners of the auto market,” says Fisher. “Now more than ever, it really pays to do a lot of research before you commit to anything.”

Most automakers are currently planning at least one pause in manufacturing to let the supply of microchips catch up. Chips are now as essential to making cars as steel, aluminum, and plastic.

Some automakers are adjusting how their vehicles are equipped to minimize the impact of parts availability. This may mean that some features you’re seeking may be harder to find. And it makes it important to verify that the model you’re buying is truly equipped with the features you want.

Why Semiconductors Are Important

Semiconductors contain microchip processors, which are used in smartphones, televisions, internet routers, and even home climate control thermostats. Cars and trucks are now loaded with electronics, so they have them, too.

Sam Abuelsamid at Guidehouse Insights says that every car has at least two or three dozen microchips, which control everything from window motors and infotainment screens to fuel management and stability control. Luxury vehicles with a lot of high-tech features may have 100 or more processors onboard, he says.

Manufacturers sold more than 14 million vehicles in the U.S. in 2020, and more than 17 million the year before, creating a need for hundreds of billions of microchips annually.

The COVID-19 pandemic is the main cause of the chip shortage. When automakers shut down factories last year—both to keep workers safe and to confront a steep drop in demand for new cars—they canceled orders for semiconductors.

At the same time, demand spiked for computers and other electronic devices because people needed to work and be entertained at home. When auto factories got rolling again and sales picked up in a big way, microchip manufacturers were unable to keep up with the surging demand.

To make matters worse, a major blizzard in Texas and a fire at a chip factory in Japan cut into an already strained semiconductor supply chain.

So where does that leave consumers? Abuelsamid says that companies like Intel, which haven’t supplied chips for the auto industry in the past, have offered to begin production. And big chip manufacturers like TSMC, a Taiwanese company that dominates the global semiconductor industry, are building more factories.

But Abuelsamid says it will take time for those changes to have a noticeable impact on the supply of new cars.

“It’s likely that car buyers will be paying more for new vehicles, at least through the next year and perhaps longer,” he says. “Most automakers are facing production cuts, which in turn means limited inventory of new products on dealer lots. Low inventory means reduced or nonexistent discounts and deals on new vehicles.”

Consequently, traditional discounts off the window sticker price have been harder to come by and typically smaller. In fact, Consumer Reports is seeing some cars sell for closer to the MSRP, and in some cases even a little over.

CR members can refer to our monthly best new-car deals for guidance on models that perform well and have notable discounts. Insights on local transaction prices—key information for negotiating—can be found on the car model pages.

The silver lining is that now is a good time to sell a car if you’re not using it much because of the pandemic. Rising prices on new cars have pushed many consumers toward used cars, making them scarcer and more expensive as well, analysts say. In other words, it’s a seller’s market.


Benjamin Preston

My reporting has taken me everywhere from Baghdad, Iraq, to the Detroit auto show, along the U.S.-Mexico border and everywhere in between. If my travels have taught me anything, it's that stuff—consumer products—is at the center of daily life all over the world. That's why I'm so jazzed to be shining light on what works, what doesn't, and how people can enrich their lives by being smarter consumers. When I'm not reporting, I can usually be found at home with my family, at the beach surfing, or in my driveway, wrenching on my hot rod '74 Olds sedan.