It’s a bad time to buy used cars in Tampa Bay. Blame the supply chain.

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Troy Julian calls them vanilla cars. Nissan Altimas, Hyundai Sonatas, Kia Optimas, Chevy Impalas, the kind of independent mid-size vehicles that independent used car dealers often let through wholesale auctions.

We kind of laughed, like, we don’t really want this car, said the general manager of Julians Auto Showcase in New Port Richey. Wed stock one or two, but I don’t need a lot of vanilla cars.

It was a few years ago. These days, dealers like Julian can’t stock vanilla cars or any used vehicles fast enough.

Some of them that are a year or two, maybe even three, they (sell) more than a new car, he said. Book values ​​that everyone has been using for years, you might as well leave them at home if you want to buy a car. I can’t believe how much money they are making.

If you’ve recently tried to buy a car, you know what Julians is talking about. Prices have reached record highs as stocks decline across the country. Blame it on the commercial quagmire plaguing retailers and manufacturers around the world: a shattered global supply chain. Which means fewer new cars at dealerships, higher demand for used cars, and fewer used cars on the market.

When the pandemic hit, manufacturers in many industries slowed production as demand for products plummeted. Spending grew rapidly, but factories and logistics companies overseas have been unable to return to pre-pandemic pace, especially in areas struggling with COVID-19 outbreaks and shortages of workforce. This has led to supply shortages, backorders and stored cargo ships stranded offshore.

This is unprecedented, said Jennifer Bisceglie, founder and CEO of global logistics and risk management company Interos. It’s not one thing that will fix it, and the money can’t get us out of it.

Related: The Cost of the Pandemic: How Tampa Bay Lost Billions of Dollars to COVID-19

For automakers, the problem is a shortage of semiconductors, microchips, and other sophisticated components used in modern vehicles. This all adds up to the higher sticker price on just about any set of wheels.

You can get pretty much anything you want; you just have to be prepared to pay for it, said Kyle Lee, owner of Lee Auto Group in Fort Myers, Naples and Tampa. Unfortunately, this spills over to the consumer.

Fewer cars, higher prices

Thanks to the shortage, the price gap between used and new vehicles is smaller than ever.

The Edmunds price guide recently predicted that the average price of a used car would climb to $ 27,306 in the last quarter of the year, up $ 1,500 from the summer and the start of the year. autumn. The average monthly payment for a used car will reach $ 500 for the first time. Used cars, according to Edmunds, are now only 18% cheaper on average than new ones.

Used car dealer chain CarMax said a 30% drop in inventory pushed retail prices up by $ 6,000 year-over-year and wholesale prices by $ 3,000. These numbers could push some used car customers out of the market, President and CEO Bill Nash said on a recent call with investors.

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Wayne McAllister, salesman at Julian’s Auto Showcase, collects car keys in the field, Thursday, November 18, 2021 in New Port Richey. [ MARTHA ASENCIO-RHINE | Times ]

Since doing this, these are the biggest jumps I can remember ever seeing, Nash said.

In Tampa Bay, used car prices rose 22.9% from September of last year to this year, just below the national average of 24.4%, according to the Car Price Index. consumption tracked by the US Bureau of Labor Statistics. (The cost of new cars rose 15.1% locally during this period, well above the national average of 8.7%.)

It’s really unheard of for the price of a used car to go up, but that’s exactly what you saw in some of these models, said Matt Degan, an editor of the Kelley Price Guide. Blue Book. I’ve been doing this for over a decade and have never seen anything like it.

Related: As Hyperinflation Talks Intensify, Florida Counts On Rising Prices

Lee said a truck that would have sold wholesale for $ 20,000 in January could cost $ 30,000 today and that is before further price hikes on parts, refrigerants and other supplies.

Yet drivers are still spending, because for many, used cars are the only viable option. Pasco County Tax Collector Mike Fasano said transfers of used vehicle titles managed by his office mostly from private sales and small dealerships increased from 74,461 in 2019 to 88,258 until October 31 of this year, which he attributes to the economic forces of the pandemic.

With moms and dads, we’ve seen a huge increase in headline work, Fasano said.

Buyers used stimulus funds they weren’t spending on vacations or concert tickets, in many cases making larger down payments on vehicles, Julian said. And they had more options. When the travel industry plunged, car rental companies like Avis and Hertz sold off entire swathes of their fleets, flooding the market with hundreds of thousands of used cars.

In the past two or three months, however, air travel has picked up. Rental companies are desperate to rebuild their fleets, working side-by-side with dealers in auctions, in some cases paying well above suggested retail prices. No one can get their hands on enough cars.

It’s a fight, Julian said. There is not enough to feed everyone.

Normally Julian would keep around 125 cars on his lot this time of year, selling around 60 a month. Today he stores and sells about half of that, all of it from this more expensive auction. Customers are shocked by the prices, he said, but the higher auction costs leave him little negotiating room.

After I sell that red Mustang with tan leather at 60,000 miles, where am I going to go get another one? And when? And how much will I pay for it? he said.

The good news for drivers is that there has never been a better time to sell or trade in a car. The dealers are desperate to get rid of it and will pay a premium for this privilege, Degan said, in some cases offering full book value.

We changed all of our ads, Lee said. All the advertising has changed to, We want to buy your car. Would pay you top dollar. Before your lease expires or before the exchange, come see us.

The road to healing

The struggles in the auto industry reflect a real-time change in the supply chain paradigm across industries, said Rob Hooker, associate professor at the Monica Wooden Center for Supply Chain Management and Sustainability at the University of Florida in South.

If you think about every node in the large network of a single supply chain for a single product, all of these companies are facing different issues of labor shortages, sick people and not coming back to work, all of them. kinds of things, Hooker said. When were they going to overcome this, when companies will be able to re-diversify their production, all of this will take time.

Related: Port of Tampa Offers Incentives to Attract Goods Stuck in Supply Chain Deadlock

The used car crisis is not just about dealers who are fighting dealerships for a handful of sonatas. Manufacturers and dealers compete for labor and logistics with companies in many other industries. Automakers compete with tech companies for a limited supply of chips, conductors, and raw materials.

What is really holding us all hostage right now is the fact that technology has hyperconnected the world, said Bisceglie of Interos. The chips that go into cars are also used in the GPS of (shipping) trucks, from a logistics point of view. They are also used in children’s toys for Christmas and health products.

Salespeople Wayne McAllister (right) and Eric Pumphrey are pictured in the field while working at Julian’s Auto Showcase, Thursday, November 18, 2021 in New Port Richey. [ MARTHA ASENCIO-RHINE | Times ]

Even if the supply chain smooths out, the car shortage could be felt for years to come. Degan talks about the Great Recession ten years ago, when lower demand led to fewer new cars entering the market.

It catches up with us again, he said. It’s hard for people who need a car, but they don’t have a lot of money to spend. They usually buy the cars that have higher and older mileage. But the supply is also low.

Related: Here’s Why The Supply Chain Is A Mess, And Will Be For Some Time

If there’s a bright spot here, Bisceglie said, it’s that the crisis has forced everyone from families to Fortune 500 companies to think more deeply about how the supply chain works. Companies will seek alternative methods of sourcing and delivery for materials they cannot do without and streamline logistics for the next supply chain crisis. And consumers who make large purchases like cars will decide with their wallets who does the best job at keeping the products they need in stock.

But it’s on the road. In the short term, Julian and Lee believe that many smaller dealerships will not survive. Experts like Bisceglie and Hooker believe it could take a year or two for the trade to come back freely. And even then, buying cars won’t quite look like it was before COVID-19.

General manager Troy Julian is pictured at work at Julian’s Auto Showcase, Thursday, November 18, 2021 in New Port Richey. [ MARTHA ASENCIO-RHINE | Times ]

We have a long way to go, said Hooker. My general hunch is that things are going to stabilize, but with these increased labor costs, these increased transportation costs, all these challenges that we have faced throughout the pandemic, it’s pretty unlikely that the prices go down.

Degan said there is only one way for consumers to know when this auto crisis is over.

Right now, most car buyers have to make some sort of compromise on the car they want because it is not available and was not just talking about a red car versus a yellow car, a- he declared. Well, know that things are half way back to normal when you can get the exact car you want for a price that doesn’t sound crazy.

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