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By: Josh Sens February 2, 2022 Have a tee time waiting? Much better hurry up and come across that vacation bag. Getty Pictures Welcome to Road Guidelines, a GOLF.com series in which we pick the brains of skilled golf vacationers, ranging from specialist golfers and caddies to globetrotting …
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Grown in central Uganda, kayinja bananas are used to make juices and beers. Ratnakorn Piyasirisorost For the last 15 years, Dan Saladino has been traversing the planet, tracking down the stories behind some of the world’s rarest foods. On his first deep dive, the food …
With dealership lots stripped of inventory, car buyers hunting for a bargain will be lucky if they end up paying the sticker price.
The cost of a new vehicle continues to soar with the global auto industry now a year into a computer-chip shortage that has shown few signs of abating in 2022.
In November, nearly 87{e9f0aada585b9d73d0d08d3c277fd760092386ec23cac37d50f4b8cd792b062a} of all new vehicles bought by individual customers sold at or above the sticker price, according to research firm J.D. Power. That number is up from about 75{e9f0aada585b9d73d0d08d3c277fd760092386ec23cac37d50f4b8cd792b062a} at the halfway point of the year, and well above the pre-pandemic average of about 36{e9f0aada585b9d73d0d08d3c277fd760092386ec23cac37d50f4b8cd792b062a} of sales.
The availability of both new and used vehicles is at historic lows, and car companies and dealers are responding by eliminating discounts and adding upcharges to the manufacturer’s suggested retail price, which is the figure displayed on the window sticker when a vehicle leaves the factory. Upcharges include selling items such as tire protection and vehicle accessories.
In addition, dealer markups—which appear as a “market adjustment” affixed next to the window sticker—are also proliferating more broadly. These dealer-price adjustments are separate from upcharges and traditionally have been reserved for rarer models. Now such adjustments appear on everything from no-frills vehicles to new, special-edition SUVs such as the Ford Bronco, dealers and analysts say.
“It’s the basic economics of supply and demand,” said Vince Sheehy, president of Sheehy Auto Stores in the greater Washington, D.C. area. “As long as we have customers waiting for the next car to show up on the lot, there’s no way we can price lower.”
Behind the markups is a historic shortage of new vehicles caused by production lost to Covid-19-related shutdowns and a global computer-chip shortage that has slammed the auto industry this year. At the same time, car buyers have flocked to the showroom in the past year, seeking vehicles for commuting, instead of taking public transportation.
“‘There’s no way we can price lower.’”
Paul Walser, a Minnesota dealer and chairman of the National Automobile Dealers Association, isn’t charging above sticker for his new cars but says he understands why some smaller dealerships may have to raise their prices. He pointed to dealers he has visited lately who have seen monthly transactions plummet and are looking for ways to cover their business expenses.
“The market is not only changed by the fact that there’s limited supply and high demand,” Mr. Walser said. “Dealers are also sensitive to their costs and making sure that they’re providing for their employees.”
Mr. Sheehy is using markups as a way to filter out one-time customers, he said. When he listed vehicles at or below sticker earlier this year, he said customers drove from hundreds of miles away to buy from him. He said those customers are less likely to come back for service or to purchase another vehicle.
“We really don’t want to sell cars to people who are not going to be our customers in the long-term,” he said. For his most loyal customers, Mr. Sheehy says he is offering to wave the price increases and sell at sticker.
The steady rise in car prices is contributing to an increase in the average price paid for a vehicle, which has hovered around $44,000 for the past two months, according to J.D. Power. That figure is about a $10,000 increase from the average price paid for a new vehicle before the pandemic, the research firm found.
Car shoppers won’t find much relief on the used-car lot, according to dealers and analysts. Prices on preowned cars have been steadily rising in the past year, with some used cars selling at or above their original sticker price. Through the first half of December, the average price paid for a used vehicle surpassed $30,000 for the first time, according to J.D. Power.
This rapid price inflation is also pricing many Americans out of the car market, furthering a trend that has emerged during the pandemic where production of more expensive vehicles is prioritized over cheaper models, according to dealers and analysts.
Some dealers are less willing to charge above sticker. Chris Hemmersmeier, chief executive of Jerry Seiner Dealerships in the Salt Lake City area, is refusing to raise his prices, even as he faces pressure to do so from his sales staff and managers, who say they could be making more money.
Mr. Hemmersmeier, who the second generation to run the family-owned dealership group, said he is worried about the long-term effects of price increases.
“I want this to continue to be a multigenerational family business,” he said. “We can only do that if the community continues to choose to do business with us in good times and bad times.”
Have you tried to buy a car this year? Share your experience with us. Join the conversation below.
The squeeze the parts crisis is putting on vehicle inventories is expected to last until well into 2022, industry executives and analysts say.
There were a little more than a million new vehicles on U.S. dealer lots or in transit at the end of November, down 63{e9f0aada585b9d73d0d08d3c277fd760092386ec23cac37d50f4b8cd792b062a} from the same month in 2020, according to research firm Wards Intelligence.
With supply tight, cars are moving off dealer lots at a blistering pace. More than half of the vehicles sold in the U.S. last month were in the showroom for less than 10 days, according to J.D. Power. The average amount of time a new vehicle sits on dealer lots is hovering around 19 days, J.D. Power found, compared with 48 days at this time last year.
Auto executives are trying to find workarounds to the semiconductor shortage, including dropping some features to save on the number of chips needed to manufacture a vehicle. Some car companies, such as
Ford Motor Co.
and
General Motors Co.
, are taking control of their chip supply by forging partnerships with some of the biggest names in semiconductors.
Even after production normalizes and the automotive industry moves past the chip shortage, J.D. Power automotive analyst Tyson Jominy said the pent-up demand will continue to put pressure on vehicle inventories.
“We expect to see this tightness on inventory lasting clear through 2023,” he said.
Write to Nora Naughton at Nora.Naughton@wsj.com
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As the government agreed to update a list of banned countries due to high levels of coronavirus infections, a move that could reduce flights abroad, Finance Minister Avigdor Liberman said those working in the tourism industry should start looking for new jobs. “As for travel …
ONBOARD THE CELEBRITY APEX — It’s the $1.2 billion flagship of the Celebrity Cruises fleet, and after a long wait, the Celebrity Apex is welcoming aboard revenue cruisers on U.S. departures. It’s been a busy few weeks for Celebrity, which is launching eight ships in …
Travel is returning, but here’s good news for those who are flying: higher fares may not.
Despite the fact that prices for pretty much everything have gone up in 2021, airfare prices dropped 4.6{e9f0aada585b9d73d0d08d3c277fd760092386ec23cac37d50f4b8cd792b062a} over the past year in terms of unadjusted percent change between October 2020 and 2021. That’s according to Consumer Price Index data released by the U.S. Bureau of Labor Statistics in November, which showed that overall inflation reached a 30-year high in October.
The CPI, which tracks prices of everything from food to fuel, surged 6.2{e9f0aada585b9d73d0d08d3c277fd760092386ec23cac37d50f4b8cd792b062a} for the 12 months ending in October, marking the largest 12-month increase since December 1990. Only a handful of areas actually saw a price decrease over the past year — and one of them is the cost of airline tickets. The price drop follows an even more dramatic drop from October 2019 to 2020, when airfares saw prices plummet 20{e9f0aada585b9d73d0d08d3c277fd760092386ec23cac37d50f4b8cd792b062a} by that same metric.
That news might come as somewhat surprising, especially given that 43{e9f0aada585b9d73d0d08d3c277fd760092386ec23cac37d50f4b8cd792b062a} of Americans say they intend to spend money on flights or hotel stays for this year’s holidays, according to a September NerdWallet survey conducted by The Harris Poll of more than 2,000 U.S. adults. That’s up dramatically from the 19{e9f0aada585b9d73d0d08d3c277fd760092386ec23cac37d50f4b8cd792b062a} of Americans who said they spent money on flights or hotel stays during 2020’s holiday travel season.
See: Storms could cause Thanksgiving flight cancellations — here’s how travelers can prepare themselves
Throw in the fact that earlier in November, the Centers for Disease Control and Prevention endorsed authorization of Pfizer-BioNTech’s
PFE,
/
BNTX,
coronavirus vaccine for children 5 to 11 years old, and it seems as though travel demand might be higher than it’s ever been since the beginning of the pandemic.
So why aren’t airfare prices rising with demand? Adit Damodaran, an economist for online airfare booking site Hopper, says it’s not that simple.
The CPI doesn’t distinguish between airfares for domestic versus international itineraries. Discounts are still hard to come by for families trying to score holiday travel deals to visit relatives within the U.S. this year.
Hopper’s own flight price index found that domestic flight prices are actually 6{e9f0aada585b9d73d0d08d3c277fd760092386ec23cac37d50f4b8cd792b062a} higher than they were last year. As it stands, the real deals can be found for flights bound to destinations outside of the U.S.
“International flights in October were 2{e9f0aada585b9d73d0d08d3c277fd760092386ec23cac37d50f4b8cd792b062a} below even 2020 prices, led by low airfares to Europe,” Damodaran says.
Late this August, the European Union recommended that its member states reinstate restrictions on U.S. tourists due to rising case rates in the country, plummeting European travel demand. General hesitation to travel — both at home and abroad — was likely further driven by delta variant-related concerns (delta cases in the U.S. peaked in late September, according to CDC data). Hopper data released in September found that round-trip airfare to Europe dropped to $565 on average, its lowest level in five years.
But then, a nearly 20-month international travel ban for travelers visiting the U.S. was lifted in November (international visitors must now show proof of full vaccination and a recent negative COVID-19 test). With that, airlines are adding international routes and creating additional supply. For example, JetBlue
JBLU,
launched nonstop service between New York’s John F. Kennedy International Airport and London’s Gatwick Airport in September. Then, Aer Lingus announced in October that it would begin operating its first ever nonstop direct flights between Manchester and New York in December.
October was a bizarre month that got caught between an increase in supply and a decrease in demand, likely leading to overall airfare discounts.
The CPI also doesn’t distinguish between basic economy versus standard or premium cabin airfares. Basic economy airfares typically have a lower base fare than the rest, but these a la carte-style airfares will separately charge you for add-ons like checked baggage, freedom to change or cancel your flight, or the ability to select your seat.
Also see: Can’t stomach the cost of Disneyland? Here are 5 theme parks that are cheaper
In the early days of the pandemic, travelers might have splurged for premium cabin seats to get a little closer to the 6 feet apart that the CDC recommends you stay from others. Or, perhaps, basic economy fares and their notorious inflexibility were largely unappealing amid the uncertainty of COVID-19 travel regulations.
Meanwhile, business travelers, who typically account for higher spending than leisure travelers, still haven’t returned. The Global Business Travel Association doesn’t anticipate a full recovery until 2025.
Basic economy fares might be more appealing these days for no-frills, casual vacationers. And while the airfare itself is certainly cheaper than a standard fare, you might end up paying the same once you account for all of the extra fees.
Not long. In fact, Hopper’s Damodaran says you may have already missed the window for cheap airfares.
“Currently, our domestic 2021 airfare is tracking at 19{e9f0aada585b9d73d0d08d3c277fd760092386ec23cac37d50f4b8cd792b062a} above 2020 prices, with international airfare up 4{e9f0aada585b9d73d0d08d3c277fd760092386ec23cac37d50f4b8cd792b062a} as well,” he says. “Domestic airfare is nearing 2019 prices for the holidays.”
He added that domestic flight searches on Hopper are up 25{e9f0aada585b9d73d0d08d3c277fd760092386ec23cac37d50f4b8cd792b062a} since the beginning of October, while international flight searches are up 70{e9f0aada585b9d73d0d08d3c277fd760092386ec23cac37d50f4b8cd792b062a}.
A big driver is simply travel demand, as people feel more comfortable traveling and are eager to make up for last year’s missed travels. Plus, with higher jet fuel prices, you should expect those increased costs to be passed on to the consumer via higher airfares.
October airfares dropped, but they’re creeping back up. Thankfully, it’s not too late to find airfare deals.
If you’ve been spending on a travel rewards credit card but haven’t actually traveled, you might have a healthy trove of points and miles to spend. While points and miles from big credit card issuers like American Express or Chase can be used to book airfare directly through the company’s online travel portals, they’re usually more valuable when transferred to a frequent flyer program of an airline or a hotel loyalty program.
It’s not uncommon to find a three-figure difference in airfare just by increasing or shortening the length of your trip by a day. Even if you find yourself paying for an extra hotel night, it might be worth extending your trip if airfare is significantly cheaper to fly out one day later.
More travel news: Ready to get out of town? 5 tips from experts who traveled successfully during the pandemic
And don’t overlook nearby airports. Most major cities are served by multiple airports, so broaden your search. The taxi might be a couple bucks more to drive to the farther airport, but it could be worth it for the savings.
Many free online tools make searching for deals easier. Flight search tools like Google
GOOGL,
Flights, Kayak or Skyscanner can compare prices by day and nearby airports. They also typically allow you to set alerts for airfare deals, which can be useful if you know you want to fly to a certain airport but are flexible as to when you depart.
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Sally French writes for NerdWallet. Email: sfrench@nerdwallet.com. Twitter: @SAFmedia.