It's an amazing time to sell a car—but terrible for buyers. How to beat the topsy-turvy car market

Before buying or selling a car, it’s important to consider your future needs, budget, and shop around for the best deal.

Myelle Lansat

By

Myelle Lansat

Myelle Lansat

Editor

Myelle Lansat is a personal finance editor at Policygenius. She writes and edits the Easy Money Newsletter.

Published August 25, 2021|4 min read

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It’s a tough time to buy a car. The auto industry is experiencing a shortage of car parts and microchips used for electronic dashboards and controls. The ongoing pandemic is causing factory shutdowns and shipping delays. The car industry is also considered a low priority for the limited supply of chips, says Matt Degen, editor at Kelley Blue Book, an automotive research company.

Consumers are gobbling up electronic devices, tablets, computers, you name it,” Degen says. “The allocation of these chips, instead of going to cars, are going to electronics.” 

It’s not impossible to buy a car in this market, but you’ll likely pay sticker price or more, Degen says. On the flip side, you could make a profit if you have a car to sell. As of July, used car prices were up 28% year-over-year. The average used car also topped $25,000 for the first time, according to Kelley Blue Book.

The auto industry may not rebound until the later half of 2022, according to experts who spoke to Easy Money. If you're in the market, here's how to navigate this year's big car shortage. 

Is this a good time to sell a car?

“It’s an amazing time to sell a car,” says Degen. You’ll likely make more money selling a used car right now than in the future. The car shortage is a nightmare for dealerships too, says Degen. Car dealers are short on inventory to sell. “That means that dealerships are willing to pay more than ever for used cars,” he says.

If you have a car to sell, the first thing you should do is get a few online estimates of your car's worth. Montoya suggests showing the most competitive estimate to a dealer and asking if they can beat it. 

“Sometimes they can, sometimes they can't, but that gives you extra leverage in your negotiation,” Montoya says. “Dealerships are paying very aggressively for used cars.”

Montoya says you’re better off going to a dealership to sell your car, whereas in the past you might have gotten more by selling it independently. “It’s worth taking it to a dealership because [they] are paying very aggressively for used cars,” Montoya says.  

How can I buy a car if I need one? 

You can still find a car in today’s market but you’re less likely to find a deal. You should expect to pay asking price or more, says Tyson Jominy, vice president of data and analytics at J.D. Power, a consumer research company. 

You can start your search by calling local dealerships and seeing what’s available, Jominy says. You’ll also want to search online. Cast a wide net, he suggests. You may find a better deal from dealerships outside your area, but you’ll have to consider how you’ll pick up the car. Shipping cars is widely available but costs can vary.  

Dealers are less likely to negotiate a car’s price with you because of the mass shortage, so be prepared to pay the asking price. “If you think you're going to get a certain price or you have something in mind — and it's lower than what the dealer says — you're not going to be the first one the dealer wants to sell to,” Jominy says. 

When you’re ready to make an offer on a car, you’ll want to stand out from other bids. That means bringing cash and financial paperwork, like a loan and auto insurance, to the table. Jominy suggests shopping around to get the best quotes. You’ll also want to maintain or boost your credit score to get even better rates

The one area dealerships might be willing to negotiate on is trade-ins, Jominy says. If you’re considering trading in an old car for a newer one, you’ll likely get a better price. “The value of your trade-in has skyrocketed,” he says. According to data from Edmunds, the average trade-in value of a used car jumped to $17,080 in March, compared to $14,160 in 2020. 

Is it worth waiting?

There’s no reason to hold off selling a car you’re not using. But experts are split on the right time to buy a car. 

Degen says it’s worth waiting for the market to stabilize if you currently have a car that gets the job done. “If you can get more life out of your car and you're not up against a wall to buy a new vehicle, the wise choice is probably to stay in that vehicle. Even if it takes some money to get it tuned up,” Degen says. 

Jominy agrees, saying “it’s worth waiting until the chips start coming back and supply picks up. We've got a lot of pent up demand to work through.”

On the other hand, Montoya says the best time to act is now. The shortage will last well into the second half of 2022 and there’s no way to tell if inventory will stabilize. “If you need a car now, just go ahead and purchase it now.”

Image: Carol Yepes / Getty Images

Myelle Lansat is a personal finance editor at Policygenius. She writes and edits the Easy Money Newsletter.