Supply points driving prices higher for both gas and EVs
By Marx Layne
A Detroit-based automotive public relations and digital media agency
Thanks to the microchip shortage found in many vehicles, the cost of used cars — in several cases — is driving prices higher than shiny, brand-new ones.
Both slightly-used SUVs and smaller economy cars are more expensive than what comes off the factory line. According to iSeeCars.com, an average one-year-old used car is getting 1.3 percent more than its newer version. Yet, consumers are finding some used cars are far more expensive.
Take the Mercedes-Benz G-Class. The coveted 2021 model had record sales, leading to a shortage of new versions. Deep-pocketed buyers are OK shelling out about 35.6 percent more for a used G-Class. Slightly-used domestic brands such as Ford Mustang, Buick and Jeep Cherokees cars are experiencing double-digit prices over their new counterparts.
It used to be getting a slightly-used car offered quite a savings if the depreciation adage is applied. But unfortunately, as soon as a car leaves the dealership lot, cars typically lose 15 to 20% of their value.
Not so, these days. The primary culprit? The mighty microchip – often referred to as the car’s brain. Microchip shortages are wreaking havoc on the automotive marketplace thanks to a severe kink in supply-chain logistics brought on by a debilitating pandemic. As a result, automakers are suspending production and demand for the slightly-used car continues to rise. Industry experts expect the microchip supply will improve in 2022. However, the cost handed to the consumer probably won’t be noticed until late 2022 or early 2023.
Mike Szudarek, automotive practice lead at PR firm Marx Layne & Company, says several factors make consumers consider the switch to electric.
This situation has car buyers asking: Is it time to switch to electric? Ditch the fossil-fuel dinosaurs for the EV (electric vehicle)? Some issues to consider before making a move:
- Right now, automakers have about 20 EV models. More is on the way in 2023, and the number will continue to climb.
- Automakers and engineers are already working on improving battery life, which dictates an EV range before it needs a recharge. Experts say the range of 500+ miles on a full charge is on the horizon, making a Detroit to Chicago trip doable.
- Repair and maintenance: Driving the car up to the corner mechanic for an oil change won’t be as straightforward. EVs require specialized and certified mechanics, and, right now, they primarily work at dealerships. So instead of an oil change, on average, every 7,500 means bumper-to-bumper systems check that includes coolant levels for the battery, charger modules and brake inspection.
- You’ll save money … eventually: In the current marketplace, EVs are more expensive than gas-powered cars. For example, a Chevy Bolt usually costs $8,000 more than a Hyundai Elantra GT. Owning and maintaining an EV will cost slightly more than a gas car, about $600 more a year. However, the longer the EV is driven, the better it compares because of reduced fuel and maintenance.
- Look for incentives: New EVs are eligible for a federal $7,500 rebate (don’t look to Tesla or GM because they’ve moved 200,000 units). However, many states offer reduced-interest loans and other incentives to purchase EVs.