Is the Inventory Shortage Coming to an End?

The inventory shortage has dragged on for more than two years now, but for shoppers playing the waiting game, it might feel more like two decades. First, supply chain and labor constraints early in the pandemic forced automakers to cut new-vehicle production; then the global microchip shortage further exacerbated the situation. Demand quickly outpaced supply, creating a “new normal” of empty dealer lots and escalating new-car prices. Shoppers who were sidelined by these conditions may finally get their shot at a new car in 2023 as inventory starts to improve — but what about the record-high prices?

Related: How Long Will the Vehicle Inventory Shortage Last?

The easing of the microchip shortage is responsible for the production and inventory improvements seen in recent months, says Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions. If this trend continues, lower prices may follow thanks to reduced markups:

“The worst of the microchip shortage should be behind the automotive industry,” wrote Fiorani in an email to Cars.com. “Better access to chips, and other components, will help manufacturers increase output of vehicles while the idea of a looming recession is slowing demand.”

“Limited access to chips pushed manufacturers to focus on higher-profit models at the cost of entry-level models, skewing the average price higher,” he added. “Consistent demand for new vehicles and a limited supply of product allowed dealers to sell at or above MSRP … With more supply and potentially less demand, prices in 2023 should begin to slip.”

Inventory Goes on the Rebound

J.D. Power data show improved production and a rise in inventory levels. According to Tyson Jominy, J.D. Power’s vice president of data and analytics, shoppers will soon reap the benefits.

“Production has been improving,” wrote Jominy in an email to Cars.com. “The industry just capped off its third straight month of deliveries to retailers over 1 million, so [it’s] not much of a surprise that inventory also topped 1 million for three straight months … As a result, consumers will start to see more vehicles on dealer lots and far less asphalt than they saw during peak summer shopping months.”

Cars.com data show new-car inventory is tracking with this trend. There were approximately 1.4 million new vehicles among Cars.com dealers in November — up 31% compared to May 2022 and 40% higher than November 2021. Although it’s a promising sign, inventory remains well below the levels seen prior to the shortage in 2019: New-car inventory approached 3.2 million that November; two years later, it’s still down 57%.

More Time on the Lot

Another sign that inventory is improving is that the average new vehicle is now spending more time at the dealership before being sold. According to J.D. Power’s December sales forecast, an estimated 47% of vehicles will be sold within 10 days of arriving at a dealership in December — down from a record 57% in March. Meanwhile, a new vehicle is in a dealer’s possession for an average of 23 days — up from 18 days the same time a year prior. Among Cars.com dealers, the average number of days a vehicle spends on the lot has climbed from 39 days in November 2021 to 44 days the same month a year later.

Top-Selling Models

Although vehicle availability is still largely dependent on the model and vehicle type, shoppers should find it easier to get their hands on some of the most popular nameplates compared to the same time in 2021. The following are inventory levels among Cars.com dealers for vehicles that make Automotive News’ most recent list of the top best-selling models.

The Ford F-150 saw inventory jump from approximately 37,500 units in November 2021 to 49,500 in November 2022 — a 32% increase; Ford Explorer inventory totaled approximately 23,000 units in November, up 47% from a year prior; Toyota Camry inventory (including the Camry Hybrid) climbed 36% to around 16,500 units; and the Toyota Tacoma is up 47% at nearly 17,000 units. The GMC Sierra 1500 and related Chevrolet Silverado 1500 saw the most dramatic inventory improvements in the same timeframe — up to 23,500 and 56,000 units, an increase of 210% and 245%, respectively.

Inventory levels aren’t trending up for all new vehicles, however. For example, inventory for the Ram 1500 fell 8% since November 2021, and Toyota RAV4 (also including the hybrid) inventory dropped more than 7%.

Overall, Jominy said shoppers are likely to find more SUVs and pickup trucks than other vehicle types on dealer lots. He noted the best inventory remains the largest segments: three-row crossovers, compact crossovers and full-size pickups.

New-Car Prices Continue to Climb

Even as inventory levels improve, new-car prices remain elevated: J.D. Power estimates the average new-car transaction price reached a record high of $46,382 in December — a 2.5% increase from the year prior. The median price for all new vehicles among Cars.com dealers was approximately $41,000 in November, up nearly 6% from $38,800 a year prior.

For the top 10 bestselling models, median prices among Cars.com dealers are up 2%-19% from November 2021 to November 2022. The smallest price bumps belong to the Camry and RAV4 at a 2% and 3% increase, respectively. On the other hand, full-size pickup trucks saw the highest price surges: The GMC Sierra 1500 was up 19%, while the Ford F-150, Chevrolet Silverado 1500 and Ram 1500 saw prices jump by 10%, 9% and 8%, respectively.

There’s promising news for shoppers on a budget, however: New-vehicle markups, which became more prevalent during the inventory shortage, are beginning to abate. According to Jominy, 51% of consumers paid over sticker price in November, down from 68% over the summer.

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• Should You Buy Now or Wait to Save on a Car?
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• Inventory Shortage Update: Should You Wait to Buy a Car?
• Inventory Shortage Leaves Little Room for Haggling; Here Are 5 Other Ways to Save on Your Car Purchase
• More Car-Buying Advice

Buy Now or Wait?

The same question we posed in June is likely still top of mind for new-car shoppers: Should you buy a car now or wait? Jominy predicts the landscape will continue to improve in 2023.

“Things are improving slowly for consumers,” he said. “Should they buy now or wait? That’s a very subjective question specific to one’s position, but in general, prices will continue to fall modestly throughout 2023.”

Waiting does pose some risks, though. If you have a vehicle to trade in, you may get less for it in the coming months as used-vehicle prices fall. J.D. Power estimates that the average trade-in value for December was $9,316, down 3.1% from the prior year and $786 less than the peak seen in June. Additionally, economic uncertainty and rising interest rates can present shoppers with new challenges. According to the firm, average interest rates for new-vehicle loans are expected to increase to 6.40%, which is 2.47 percentage points higher than the same time a year ago.

Shoppers who don’t want to wait (or who can’t put off a car purchase any longer) can still come out ahead, especially if they have a trade-in, notes Jominy.

“The average consumer is still getting over $9,000 of equity out of their trade, which is helping to offset record vehicle transaction prices,” he said. “There are even a smattering of incentives in the market now — primarily moderate APR deals.”

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