Why is it so hard to buy a car right now?

Empty carpark with single car due to short supply

Feel like it’s time to refresh your ride? Expert advice says think twice. 

Mike Sinclair, editor-in-chief of Carsales says that his number one tip is to “buy what you need, rather than what you want. If you’re happy with your car and you don’t need to change it, it’s probably a good time to sit on it.”

You might have heard talk of the global “chip shortage” - more on this later - but Australia’s current car troubles are a perfect storm of conditions. Similarly to soaring energy prices, the rising costs of cars are impacted by (amongst other things) the war in Ukraine, trickle-on effects of COVID-19 and the price of fuel.

What is the chip shortage and why can’t I find the new car I want?

If you’re looking for that sweet new model, you might have a hard time. 

There are roadblocks in the process from production to delivery, and the cars simply aren’t here.

What you may have heard about the chip supply refers to a global semiconductor shortage, slowed by COVID-19 but long-standing in the industry. With slowed production and long-term shortages in the area, the increased demand for computer chips in cars is seriously outpacing the production rate. 

Sinclair explains: “Cars require more and more computers. Even a heated seat in a car has a little computer in it. The chip-loading in cars has gone through the roof - all those great safety features that have gone in cars require computers,” adding that the issues we’re experiencing now “was coming anyway.”

It isn’t all about the chips - other key components are critically delayed. 

A fan of German motors like Audi, Volkswagen and BMW? These brands have all historically sourced their automotive wiring loops from manufacturers in Ukraine. This process is understandably significantly delayed by the Russia-Ukraine conflict.

Complications don’t end there, as the world handles the ongoing impacts of COVID-19. With Chinese auto production plunging in April due to COVID shutdowns, the Chinese industry is working to maintain stable production as demand continues to rise. COVID-19 also continues to affect the supply chain in smaller ways, with illness and absenteeism causing disruptions to workflow.

Then it’s time to get to Australia, which is an issue in itself. With fuel prices at an all-time high, shipping is at its most expensive and you’re bound to feel that burn when it comes to retail pricing. 

That’s not even to mention the massive fumigation delays caused by invasive stink bugs when importing cars - believe it or not!

All of these factors combine for a less than ideal market. Cars marked up above their recommended prices are growing more common, as well as massive backlogs in fulfilling orders for certain models.

orange second hand car purchased with used car loan

Are second hand cars the way to go?

Thinking you might stick with a second hand car? Be wary.

Used car prices have continued to rise in the past 12 months, according to Datium Insights and Moody’s Analytics Used Vehicle Price Index for May. While Aussies' household savings have stayed above pre-pandemic levels and cars are in high demand, we no longer have lots full of cars ready to drive away.

It isn’t unheard of to find a listing for a used car with 50,000 kilometres on the odometer selling for that same as or higher than the original sell price. Stranger still? It isn’t unusual for that listing to get snapped up, and fast.

Sinclair recommends using a comparison site and getting to know the car you’re looking for if you are in the market for a second hand purchase. It’s important to “understand how many are out there, and understand particularly if there’s stock in your areas”, he says. In this case, knowledge will help you navigate the market much more effectively.

What does this mean for my wallet?

Well, it’s great news if you’re looking to sell (and not to immediately replace it with a new car). No longer does your car necessarily depreciate in value as soon as you put some miles on it, and it could be a great time to take advantage of this.

Alternatively, if you do decide to stick it out with your current car, that’s more money in your back pocket. Consider how you can get the most out of it by comparing savings accounts

There are lights in this gloomy landscape. Sinclair points to South Korean manufacturers as a reliable provider, along with some Chinese automotive manufacturers when production is in full swing. He also notes that in between these times of high demand and low supply, there will be “up and down supplies of models as production frees up or the Australian stuff comes online.”

In the meantime, it looks to be a waiting game. Though things might not return to normal any time too soon, the industry is gradually finding workarounds and solutions to all of these issues to fill the current demand. If waiting things out isn't an option, and a car is something you need right now, you might want to look at car loan options which could give you needed support.

Compare car loans with our Car Loan Comparison Calculator. Find our Best Car Loans and Best Used Car Loans from the Mozo Experts Choice Awards to see our selections.

Compare car loans - last updated 28 May 2024

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* WARNING: The Comparison Rate combines the lender's interest rate, fees and charges into a single rate to show the true cost of a personal loan. The comparison rates displayed are calculated based on a loan of $30,000 for a term of 5 years or a loan of $10,000 for a term of 3 years as indicated, based on monthly principal and interest repayments, on a secured basis for secured loans and an unsecured basis for unsecured loans. This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

^See information about the Mozo Experts Choice Personal Loan Awards

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