Why  Are Luxury Car Prices Higher Than Ever?

Car prices, both new and used, have recently skyrocketed.

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Why Are New Car Prices Rising?

The global pandemic increased the demands of luxury cars as customers, having hefty savings and nowhere to spend during the pandemic, decided to get a new car.

Meanwhile, the supply chain and assembly units were severely impacted by lockdowns, exacerbating the situation. All of this contributed to a price hike of new luxury vehicles.

Although several factors have contributed to pushing the prices of luxury cars upwards, here we discuss some of the most recognizable ones.

Limited Supply Of New Cars Due To Chip Shortage

As factories of most auto part manufacturers remained shut for a major portion of the previous year, the world faced an acute shortage of computer chips.

Some manufacturing facilities have yet to be restored to full capacity, which is why the shortage persists.

An average vehicle contains 50 to 150 chips, whereas luxury cars have even more, so a lack of computer chip availability has contributed to further car delivery delays.

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People Are Returning To Work

Since the factories were shut, luxury cars could not be produced in the quantities that the automakers had previously offered. As a result, 3.4 million fewer new vehicles were sold in the United States during the first quarter of this year.

The supply-demand relationship played a role in driving up the prices of available vehicles.

With people returning to work, production has started to resume, but it is still not up to full capacity.

Higher Annual Inflation Rate

The annual inflation rate in the United States has reached 6.2% percent, the highest level since November 1990.  Due to this amplified inflation rate, prices of all products, particularly luxury cars have seen a massive rise.

Dealerships Being Avaricious

It’s human nature to capitalize on every opportunity to make money and what could be better than a time when the production level was at an all-time low and the demands were skyrocketing?

Dealerships are charging higher commissions and fees to interested customers. This is the first time in history that car dealers have been able to do so because the supply chain has been unable to meet customer demands.

With no other option left as a resort, customers interested in new luxury cars are being forced to pay extra.

Entry Level Options Are Being Ignored

Full-size SUVs and luxury cars have been in high demand for the past several years. No one has been interested in the traditional sedans and smaller more economical vehicles lately.

Automakers who closely monitor their customers have taken notice, which is why the production of entry-level options has been ignored in favor of luxury vehicles with higher MSRPs and thus a higher profit margin.

Final Verdict

The effects of the pandemic will last for a while. Meanwhile, we just have two options: either pay more for luxury vehicles or wait until the market settles. The choice is ours.

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