New car stock shortages: Discounting? What should you do?

Let’s say you’re in the market for a new car, and you’ve heard about all those stock shortages at new car dealership. What should you do? Can you still get a discount?

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The car industry is ruing the day it screwed all those computer chip manufacturers over, because when the pandemic hit, and demand for TVs, computers and gaming consoles went through the roof, carmakers got left out in the cold.

Production lines didn’t exactly grind to a halt, but global demand for cars has eclipsed supply, and the thing stopping carmakers from making more cars is chip manufacturers struggling to supply more profitable chip-sets to the likes of Apple and Samsung.

Now that we’re all caught up on the underlying causality, right now, waiting times on some models have receded over the horizon. So, we’re in a market where demand - in general - grossly exceeds supply. And when that happens (economics 101) it places upward pressure on prices.

In other words, there’s a flood of buyers. And limited supply of new cars to satisfy them. Therefore, dealers are generally not motivated to discount. Not like they were two years ago, when car sales were in the doldrums and they couldn’t shift the stock they had.

So, if you are in the market for a new car right now, my strong advice is: Wait if you can. Because discounting will return in earnest when supply frees up - and this may be as early as six months away. It might be longer. Anyone who tells you they know exactly when is - frankly - full of it.

Obviously, if your car just got written off, you probably cannot wait. You need a car. That sucks. But for most other people, waiting is the smart commercial move. For many cars you’ll be waiting anyway, even if you sign on the dotted line now. And you’ll likely pay the full freight, or near enough.

It doesn’t seem like a smart move for most people to sign, pay a deposit and wait until - allegedly - October, or something. Why not leave your options open, remain uncommitted, and see what’s happening in October? I’d play it that way.

Some people have said to me they can’t wait because their lease is running out. To which I would retort: Dude, ring the finance company. Refinance the balloon for 12 months. Take a break on the payments (because it’ll cost you less to do that) and then reassess when supply frees up.

Dealers are, of course, still dead keen to stitch you up. Now. Because a deposit and a signature is money in the bank at a later date, with less of a discount than they would normally have to concede to get you over the line.

Plus, stitching you up now takes you out of play. You are unlikely to shop around much more, and you probably won’t therefore transact with a different brand, or at a different dealer, because the deposit is hanging over the head of your deal. If you back out, they’ll be keeping that deposit, which is, essentially, money for jam.

It’s very dangerous to go into a dealership with the vague intention of ‘just looking around’ - because dealers are ambush predators, and you are standing on their X.