Personal Finance

Buying a new car is a challenge amid a global chip shortage and limited inventory. Here are tips for finding a decent deal

Key Points
  • The price paid for a new car averages $41,378, according to a recent estimate.
  • The average discount offered is about 4.3% of the sticker price, less than half what it was a year ago.
  • These tips can help you find a deal if you're flexible about brand or model and are ready to act quickly.
David Paul Morris | Bloomberg | Getty Images

Being in the market for a new car right now is challenging, to say the least.

Heading into the long Labor Day weekend, transaction prices remain elevated. While the three-day stretch normally marks when dealerships hold big sales events to clear their lots and make room for next year's models, low inventory and strong consumer demand mean fewer incentives are needed to sell cars.

"It's a tough environment," said Kelsey Mays, assistant managing editor for Cars.com. "I don't think it's a surprise to shoppers, but that doesn't make the situation any easier."

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An ongoing global shortage of microchips — key components needed for today's autos to operate — has impacted manufacturers' production of new vehicles, which has translated into demand outpacing supply. The result has been fewer discounts being offered across the board, with some autos selling for more than sticker price, and demand spilling over to the used-car market.

Dealership inventory is roughly a third of what it was pre-pandemic, according to research from J.D. Power and LMC Automotive. The average time for a new vehicle to sit on a dealer lot before being sold is an estimated 26 days — the first time on record below 30 days. Two years ago — pre-pandemic — it was 62 days.

The average price paid for a new car is $41,378, according to J.D. Power. The average discount — if offered — is about 4.3% of the sticker price. That's less than half what it was a year ago.

Switching to the used-car market may not offer much of a reprieve, either. The average price paid for a used vehicle is $27,272, according to auto-research firm Edmunds.com. That's 25% more than the year-ago average price.

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Nevertheless, if you're in the market for a new car and hope to get a decent deal, not all hope is lost.

For starters, if you have a trade-in, the value might be more than you anticipate due to the spillover demand for used cars. Even vehicles with higher mileage are fetching more: The average amount paid for autos with mileage between 100,000 and 109,999 rose in June by 31% to $16,489 from $12,626 a year earlier, according to Edmunds data.

So although you may be unable to get the price of your new car down, it's possible you could score more for your trade-in.

And although discounts are not as generous or widespread as they have been during past Labor Day weekends, there are some specials that may be worth taking a second look at even if they aren't for your favorite model or brand.

"There are a few cars with decent inventory and reasonable incentives," Mays said.

For instance, many versions of the 2021 Chevrolet Equinox come with a factory discount of $3,000, or 7% to 11% off the price, according to Cars.com. Accounting for that discount, the price would be roughly $24,500 to $43,000, depending on the trim. That offer ends Sept. 30.

Similarly, the 2021 Buick Enclave's manufacturer discount of $4,250 would result in a price of about $37,000 to $59,500, depending on the specifics. 

If you're struggling to find something suitable nearby, it's worth expanding your search, Mays said. Some buyers — roughly a third — are willing to look within a 100-mile radius for a car they want.

This new-car shortage isn't expected to right itself anytime soon.
Ivan Drury
Senior manager of insights for Edmunds

Additionally, you can consider leasing.

"That may be the cheapest way to get into a new vehicle," said Ivan Drury, senior manager of insights for Edmunds.

Although leases generally come with restrictions on mileage and you can end up charged for excessive wear and tear, they typically last for just a few years. So if you're not in love with the car, at least you aren't in a five- or six-year loan, Drury said.

Also, if you see something you want, don't wait too long to pursue it.

"If you wait around … you'll miss out," Drury said. "We're seeing cars flying off the lots."

Roughly a third of vehicles are selling within one week of hitting dealerships, Edmunds data shows. Many are even selling the same day of delivery.

"This new-car shortage isn't expected to right itself anytime soon," Drury said.