First-Time Car Buyers Battle Skimpy Supply, Sticker Shock

With the current car shortage putting dealers in the driver’s seat, it’s important to arm yourself with knowledge. Credit: Getty Images/Maskot
Imagine buying your first car during the worst car market in recent memory.
Inventory shortages and rising prices began with the pandemic-driven computer chip shortage in 2021.
The average transaction price jumped to $47,148, up more than $5,000 from a year ago, as most buyers paid more than the sticker price. The average used car price remained near record levels at $28,312, with some models fetching higher prices than new.
First-time car buyers have long been guided by internet lore and the experiences of their friends and relatives. What’s it like to shop when those rules no longer apply?
Kevin Nguyen, whose data analyst job moved him from using public transportation in Toronto, Canada, to needing a car in Austin, Texas — said in an email, “Everything I knew about cars, especially the depreciating asset part, was no longer true today.”
He added, “Cars were more expensive than their original purchase price, even if they were used with thousands of miles over several years.” As for purchasing new, “Dealers had no idea when they would get inventory. I got quoted late summer 2022 when I inquired in November 2021,” he said.
But Nguyen did find the vehicle he needed, as did first-time car buyers Ben Johnson, of Evansville, Indiana, and Ellie Morris, of Nashville, Tennessee.
Prepare before you shop
Nguyen, Johnson and Morris used online car retailers like CarMax, Carvana and Vroom to research car prices and various makes and models before they ever approached a dealership.
Using this benchmark pricing, Nguyen then checked with local dealers to see what inventory was available based on his preferences for a Hyundai Elantra or Honda Civic.
Needing a car right away, Johnson used online sites to quickly research must-have features, fuel efficiency and safety ratings.
Morris used the CarGurus car-buying app along with other online sites. In fact, she credits the app with helping her find the 2017 Ford Edge Titanium she bought at a local dealership in May.
She says, “A lot of other Fords just like this one, their miles were a lot higher and the price was a lot higher, even though they were pretty much the exact same car. ”
Make your financial plans
Set a budget so you can determine a price range and avoid overspending. Johnson, who took out his first car loan, had to make some financial adjustments to afford a car payment, like swapping a gym membership for exercising around his apartment.
Experts recommend spending less than 10% of your take-home pay on a car loan.
At the suggestion of the dealership, Johnson made repairs to his existing car to increase the trade-in value toward a down payment.
If possible, car buyers should strive to put down 20% of the purchase price for a new car and 10% for a used one.
Johnson financed through the dealership and felt he received a good loan interest rate but says he wishes he had more time to shop around.
Getting preapproved for a car loan before you shop is always a good idea.
In this car market, be fast and flexible
Being able to move fast enough to get a car before someone else was a challenge all three car buyers said they faced. Also, being flexible was key.
Johnson’s first choice was a Toyota RAV4, but after finding none available within a two-hour drive, he began visiting local dealerships for other brands with his must-haves list in mind. He ended up buying a 2022 Hyundai Kona.
“Once I drove the Kona, it did everything that I wanted in the RAV4,” he says.
After finding that local dealers wouldn’t have the brands he wanted for at least six months, Nguyen returned online to buy a 2020 Hyundai Elantra SE.
Nguyen’s final bit of advice about finding a car: “If there's a deal, then just go for it. Being indecisive will cost you a good deal as someone else will snatch it up immediately.”
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