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Published: Sep 02, 2021 9 min read
High angle view of saleswoman and customer looking at car in showroom
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Labor Day weekend is traditionally a great time to get a deal on a new car. But 2021 is different, and not in a good way.

Anyone heading to a car dealership nowadays expecting the usual buying routine — a decent array of cars, a little haggling, driving away with a sweet deal — is likely to get laughed off the lot. Quite simply, it's never been harder to find the car you want if you're picky, and it's nearly impossible to get a genuinely good deal on the paltry selection available.

"You're just not going to get a deal, by any means necessary," says Ivan Drury, senior manager at the car buying and research firm Edmunds. Instead of using the word "worst," he describes right now as the "most difficult" and "most aggravating time ever to try to buy a car."

The reason why this is so comes down to spiking demand combined with inadequate supply. As a result, the usual discounts and promotions have disappeared. Shoppers can expect slim pickings for new and used cars alike, and for new cars to be selling at MSRP (manufacturer's suggested retail price, or "sticker price") and possibly even higher.

The average used car sales price topped $25,000 for the first time ever this summer, according to Kelley Blue Book, while the average new car is also selling for an all-time high of nearly $43,000. Those figures are up from roughly $21,000 and $37,000, respectively, in 2019.

"I feel for the people who are in the market for cars now," says Drury. "You really have to unlearn all of the classic car-buying strategies from years ago and take whatever you can get. If I was buying a car today, I'd lose my mind."

"Basically, everyone is screwed," he adds.

Why cars are so expensive now

Very early on in the pandemic, car sales dried up (and car insurance companies even gave customers money back) as quarantine rules set in, commuting all but went away and people remained mostly housebound. Sales for new and used vehicles picked up starting in the summer of 2020, though, and have remained red hot through 2021.

At the same time, the global supply chain has been overwhelmed, causing shortages and raising prices for everything from tennis balls to toys and clothing to refrigerators. And cars, of course. In fact, cars are in particularly short supply because of a global scarcity of microchips.

Normally, some cars languish on a dealership's lot for weeks if not months, and it's these vehicles that sales managers are willing to sell at a steep discount. Lately, though, new cars are much more likely to sell very soon after they hit the dealership. New Edmunds data shows that one out of three new cars is selling within the first week of arriving at a dealership, and almost half sell within two weeks.

Edmunds tracks average discounts on new cars, and from 2016 through the early summer of 2020, the typical transaction came with $2,000 to $2,500 off MSRP. Since then, there has been a sharp decline, and the average discount as of July 2021 was less than $100 below the sticker price.

Dealerships could sell cars today for less than MSRP, but why would they? "If you don't buy at the price the dealership is asking, they know someone else will in the next couple of days," says Drury.

It may look like car dealerships are being greedy — and sometimes, they probably are — but they don't have as many vehicles to sell as they normally do, because of limited supply. So they have to make as much money as possible on the limited number of cars they do have on the lot.

How to buy a car now and get a good deal

Flexibility is critical if you're hoping to get anything approaching a decent deal today. That starts with the vehicle you're hoping to buy. Trucks and SUVs are in high demand, as usual, and it's even less likely those vehicle types will be discounted. For example, according to Consumer Reports, the mid-size SUV Kia Telluride and Chevrolet Silverado 2500 pickup truck have been selling recently for 17% or 18% over MSRP, on average.

Sedans and select other vehicles that aren't in high demand are where some relatively good deals can still be found. Each automaker and dealership's roster of cars that can be purchased at a discount will differ, but Edmunds says models like the Jeep Renegade, Chrysler 300 and Nissan Maxima have been available for 7% to 17% below MSRP lately.

Here are some more tips to help you buy a car nowadays:

• Bring your trade-in. The upside of spiking used car prices is that your trade-in is worth a lot more now. The average trade-in value was over $21,000 in July 2021, compared to around $13,000 in the same month in 2019 and 2020. "Some dealerships don't want to even sell you a car today if you don't have a trade-in," says Drury.

• Prearrange financing. If you need a car loan, shop around and get pre-approved before you start negotiating with dealerships. When you find the car you want, give the dealership the chance to beat your financing terms with their own lending partners. Dealerships can make some money this way, so they'll be more willing to work with you on the sale. Just be sure you inspect the fine print closely and verify the dealership's offer is equal or better to the pre-approved loan.

• Consider leasing. Even if you normally prefer to buy your cars outright, it may be worth looking into leasing. In a lease, the dealership is basically guaranteed to get the car back in the future — when it can earn some more profits by leasing or selling the car again, to another customer. That's why dealerships may be especially game to work with you on a lease in today's market.

• Use the web. You could waste a ton of time by physically going to dealerships to find out what cars they have in stock. It's much more time-efficient to reach out to a dealership's online sales staff, or to use a service like TrueCar, to inquire about vehicle availability and even leap into the negotiating process virtually. This has been a wise tactic for years, and it could really save your sanity today. Be willing to get on the phone, too: In many cases, this shows car sellers that you're a serious buyer.

• Act quickly. Car dealerships know that they are, well, in the driver's seat nowadays when it comes to negotiations. As mentioned above, new cars are selling at an incredibly quick pace, and if you don't buy, the dealership sales staff knows another buyer is around the corner. So if you truly need a car and find one you can live with, it's best to act quickly — even if it's not the exact color you want or it feels like you're overpaying.

Then again, if you don't really need some new wheels, it's best to hold off until the supply rebounds and the market is less overheated. "My advice is to wait until next year, if you can," says Drury. "Or maybe even longer."

A final tip, assuming you are holding onto your car. Soaring used-car prices could mean the payout from your car insurance for a total loss could fall below the cost of replacing the vehicle in today's market. Some adjustments to your current insurance may be worth considering.

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