Blog

Why the Global Microchip Shortage is Great for Your Used Car Value

 

Why the Global Microchip Shortage is Great for Your Used Car Value

Right now we are experiencing one of the best “sellers market” of the last decade. And it's all thanks to a tiny microchip.

Demand for microchips is at an all-time high. Microchips (also known as semiconductors) play an integral role in your vehicle's day-to-day operation. From your digital odometer and display screens to advanced driver assistance features, microchips make it all possible. Plus, demand for cellphones and laptops has skyrocketed since the start of the pandemic. This has all resulted in demand that has outpaced production, resulting in massive new vehicle shortages.

Kia was the only automaker that anticipated this shortage and have full inventory available. But more on this later.

Let's take a closer look at what this all means.

Many other manufacturers are seeing new car inventory down as much as 48% over last year due to lack of microchips. And so, demand for used vehicles has skyrocketed.

The manufacturing and distribution of these chips is a very detailed and time consuming process, with large orders of semiconductors taking months to complete. This shortage has caused a backup at automaker manufacturing plants. Some automakers have even closed down entirely until microchip supply can catch up with demand.

Making this problem even worse, many other industries that use microchips, such as cellphones and personal computers, have expanded greatly in the last year, increasing demand for microchips even further.

All of this, combined with a post-pandemic economic bounce back, has seen used car demand hit a recent all time high.

Prices Going Up

While used cars usually depreciate slowly over time, these unprecedented conditions have seen most used vehicles actually gain value over the past year. On average, the price of a used car listing has gone up 29.6% over the past year.

  • The supply of new vehicles has decreased due to lack of microchips
  • The supply of used vehicles has decreased as people upgrade to their second-choice used vehicle
  • RESULT: the price of used vehicles has increased

When Will It End?

Because of the long production time and demand being at an all time high, don’t expect this shortage to end any time soon. As Nick Woolard, an auto analyst for TrueCar, puts it, “Anyone waiting for prices to go down, might be waiting awhile.”

This however does not mean that consumers can’t take advantage of these market conditions. Nick goes on to say “It’s a great time to trade or sell a used vehicle—used vehicles are going up in value, and that doesn’t happen that often.”

Kia Does it Again

However, consumers should know that not all manufacturers are stopping production.

Kia (and their sister company Hyundai) were the only manufacturer to correctly predict this shortage ahead of time and order extra chips early to overcome this production shortage. “They did anticipate this issue, which is very smart on their part,” said Ed Kim, vice president of industry analysis for AutoPacific.

Conclusion

All this to say trading in your used vehicle and taking advantage of decade high trade-in rates is just good money sense.

Have questions? Contact Kia Victoria today. Ready to drive? Click here to book a Test drive. Or, appraise your trade-in vehicle online to find out what your vehicle is worth. Not looking to buy a new vehicle or already bought a new vehicle elsewhere? No problem, Kia Victoria will offer top dollar for your vehicle whether you are buying a vehicle from us or not. Click on one of the links above or give us a call at 250-360-1111 to get started.