Why your car's value may have shot through the roof

• Author: Chris Remington
• Posted: 2024-06-28

Buying a car is always an expensive proposition and often a losing one from an investment perspective since cars always lose value when you first purchase them. That being said, times are changing: A shortage of computer chips has lead to a major shortage of new cars, and thus, in turn, has lead to a major increase in the price of some cars. As a result, your car's value may have increased, and depending on when you made a purchase, it may even be worth more now than when you first bought it.

The value of your car is increasing

A new survey has shown that many car prices are increasing, with car owners often able to get back as much as 95% - or more - on the car that they purchased. The same survey shows that the actual price alters dramatically, depending on the type of car that was purchase. However, some cars, such as a Corvette, Ram 2500, Dodge Challenger, or Camero are now worth more - used - than what the price was when customers first paid for them.
These are extreme examples, but fundamentally, they hold for almost every car type: The cost of cars has gone up. While this is great news for car owners, it is not as great news for potential buyers, who are having to contend with reduced inventory and inflated prices. Indeed, the same survey notes that many car dealers are struggling to get cars onto their lots, citing a reduction in supplies. Car prices have increased on the purchasing side, as well, creating a double whammy for customers and dealers alike.

Computer chip shortage is to blame

As you may have heard, there is currently a major shortage of computer chips. This is affecting an entire slew of industries, but particularly new cars, which have significantly advanced computer chips to handle a variety of their electrical and navigational components. Alternatives to these computer chips are hard to come by, and they cannot be quickly implemented. As a result, many car companies have been forced to slam on the breaks of their productions, causing major disruptions to the entire automobile industry and all of its ancillary industries. This pain, of course, is being felt acutely by dealers and customers, and it is largely responsible for driving up the price of a new car.
The problem itself is a result of a variety of factors. Increasing demand is largely responsible. The global pandemic is ending, economies are recovering, and people want to buy more. This includes cars, phones, computers, video game systems, and more. As a result, demand is through the roof, and supply simply cannot keep up.
Of course, there are issues on the supply end, as well. Traditionally low inventory levels are hitting some companies hard and leaving them scrambling to replenish their stock of computer chips. COVID-19 issues in Asia are causing kinks in the supply line, disrupting both the manufacturing of these chips and the shipping that gets them across the rest of the world. These are not issues that can be solved instantaneously, either, as they are affecting industries across the planet. Weather is to blame as well, as fires and droughts are impacting certain supply lines.

How long will this last?

At least a year. Global supply chains cannot be smoothed out in the blink of an eye, and it will take time for factories to adapt, for workers to recover, and for new capacity to be brought online. Governments across the world are helping, of course, but none of these issues can be instantaneously resolved. Furthermore, even after capacity is back to where it was before the pandemic, it will likely take another few months for companies to replenish their stock and inventory.
What does this mean for the average consumer? Well, if you're looking to make a purchase of any product that has a computer chip, you're going to be challenged. But, if you're looking to sell certain items - like a used car - then you may be in luck, as this is the absolutely perfect time to do just that.