Bay Area Car Buyers Worry, Frustrated Dealers Clash

Gokson and Yassin Seran have a teenage son who has just started driving, so the Morgan Hill couple spent Thursday in the South Bay looking to buy a car — amid record prices for new and used vehicles.

“It’s a scary time,” said Goxen, 47, an elementary school principal in San Jose. “It’s expensive,” added Yasin, 47, a business professor at San Jose State University.

With the COVID pandemic creating a severe shortage of computer chips, new vehicles are expensive and rare, pushing many buyers to used cars, driving up their prices. Around the Bay Area, where new and used car prices are above the national average, and new cars are selling for the second-highest prices in the U.S., buyers face unusual sticker shock and Sales people are monitoring these lots alone. Viral outbreaks with updates at the factory

“In over 22 years in this business, I’ve never seen anything like it,” said Dmitry Shmilov, senior sales manager at Envision Honda in Milpitas. “We usually have over 700 new cars on this lot and now I have less than 10.”

SAN JOSE, CALIFORNIA – JULY 21: Yasin and Goxin Seran of Morgan Hill shop for a used car at Capital Chevrolet on Thursday, July 21, 2022 in San Jose, California. (Carl Munden/Bay Area News Group)

Sjm L Carcosts 0723 90At Capitol Chevrolet in San Jose, Cerans had his eye on the Tesla Model Y compact SUV. This pair in many ways represents today’s typical Bay Area car buyer. He wants to give his nine-year-old Honda CRV to his son but needs to change it for travel. “We’re looking for an electric car because gas prices are going up,” Yasin said.

Auto industry analyst Evan Drey said car buyers tend to buy when they need to, even if prices or financing costs are high, and in the Bay Area, where environmental consciousness and income are relatively high, many consumers are looking for small cars, electric vehicles, and more. And love luxury. “The Bay Area isn’t immune to gas prices, either,” added Brands-Dreary. “For a large number of area residents, public transportation is not an efficient travel option,” said Dr. K. Drery of auto industry data firm Edmonds. said, “You really need your own personal transportation.

According to Edmonds, the Bay Area has the second-highest new car prices in the U.S. so far this year, trailing only Los Angeles. New cars in the region sell for an average of $50,000, compared to the US average of $46,000, and used cars average $30,000, compared to $29,000 for the US.

According to Cox Automotive, new car prices hit a record high in June, followed by used car sales in December. According to Edmonds, in 2019, before the pandemic brought knee-jerk car production and increased demand for the semiconductor chips that fill them by the hundreds and are used in consumer electronics, an average Bay Area new car cost $40,000 and Used car for $23,000, according to Edmonds.

Because of the lack of a chip, dealers are selling some new vehicles without chips for specific functions, such as heated seats or driver assistance. Customers can at least get a vehicle, and come back later for chips.

But some buyers are waiting until their preferred options become available. And some option configurations are “not buildable at all,” said Tyler Block, general sales manager for Capital Buick/GMC in San Jose. “Sales are down because we haven’t been able to get adequate inventory,” Block said, adding that he should have more than 125 new vehicles on the lot but has 14.

Profit margins on new cars have increased, Block said, but not all vehicles are marked up. And automakers are rewarding dealerships that sell more cars by sending them more cars, and incentivizing dealers to sell, Block said. “Not all of my inventory has markups,” he said. Its GMC Yukon AT4 SUVs and diesel Sierra 2500 pickups are marked down, but its GMC Terrain and Acadia SUVs remain at manufacturer’s suggested retail price, and Buicks are discounted “because” they sell less. is difficult,” Block said.

Block said new-car buyers are increasingly “cross-shopping” between automakers, with their brand loyalty eroding due to skyrocketing prices. Some people look at the scarcity of new vehicles and the sticker prices and decide, “I’m just going to go get a pre-owned vehicle,” Block said. The change has sparked a desperate scramble among used-car dealers to fill the stretch of asphalt after it bursts with new vehicles. “We’ve had to focus,” Block said.

But with fewer new vehicle sales, fewer trade-ins enter the used vehicle market, analyst Drury said. Rental car companies are hanging on to vehicles they may have sold in bulk in the pre-pandemic days. It used to be that a large number of leased cars would go to auction after a few years and end up on dealers’ lots, Drury said. Now, consumers are buying their leased vehicles saying, “I don’t want to deal with paying a lot of money for a used car or a new car, so I’m just going to keep it.”

Drury noted that even higher prices for older, higher-mileage vehicles can provide a silver lining for people who have cars they don’t need. “You’ve got a wonderful asset sitting in your driveway,” he said.

Shmiloff said Envision Honda and Envision Toyota in Milpitas have their sales and service departments contacting customers and asking them to sell their cars. Outside the lot, Milpitas business analyst Eric Howe drove into his black 2016 Honda Accord after receiving a letter from the dealership. Any offer from Envision would have to be higher, he said. “If I sell it to them, what am I going to do in a car market that’s this tough?” Ho said, 28.

San Jose, California - July 21: Used Cars Fill The Lot At Capital Expressway Auto Mall On Thursday, July 21, 2022 In San Jose, California.  (Carl Munden/Bay Area News Group)
SAN JOSE, CALIFORNIA – JULY 21: Used cars fill the lot at Capital Expressway Auto Mall on Thursday, July 21, 2022 in San Jose, California. (Carl Munden/Bay Area News Group)