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buying Don't expect the classic Memorial Day car deal this weekend

13:30  28 may  2021
13:30  28 may  2021 Source:   cnet.com

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This Memorial Day weekend will not feature the blowout, excellent deals car buyers are used to over the holiday. Instead, pent-up demand following the most stringent coronavirus-related shutdowns and the ongoing semiconductor chip crisis created the perfect storm. Demand is up and supply is down. Basic economics tells us that leads to higher prices, and JD Power's May sales forecast shows that's exactly the case.

a car parked on a city street filled with lots of traffic: Everyone wants a new car. Bloomberg/Getty Images © Provided by Roadshow Everyone wants a new car. Bloomberg/Getty Images

Released Thursday ahead of the holiday weekend, JD Power's forecast shows auto sales continue to boom following the worst of the pandemic. Retail sales are expected to rise by 34% compared to May 2020, and grow by 10.6% compared to May 2019, for a non-COVID-19-related baseline.

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Now, as for why those Memorial Day deals will likely be scarce, here's the data. JD Power showed automaker incentive spending is expected to fall to just $3,000 this month on average. In other words, car companies are only ready to put $3,000 on the hood of a car to move it. And that's on average, so your mileage may vary in this market. The figure's down from nearly $5,000 in incentives this time last year, and back to our pre-COVID baseline, down from about $4,000 in May 2019. Automakers don't need to entice buyers if there's already so much demand and too few new cars to go around. The forecast puts the average price of a new car in May 2021 at $38,255 and the expected average new car loan payment is $596.

a police car parked in a parking lot © Bloomberg/Getty Images

There remains a single, solitary ray of hope for car buyers who need to step into a new car: trade-in values. With new vehicle inventories down significantly, used car prices remain on the up. In turn, buyers trading in a vehicle continue to receive much higher values. According to JD Power, buyers should on average expect to receive $6,201 more when trading in their car -- a 108.7% increase compared to May 2020. The extra cash can go a long way towards a new car, but those screamin' good deals likely won't be around this weekend.

Who's loving the semiconductor chip shortage? Car dealerships

  Who's loving the semiconductor chip shortage? Car dealerships With inventory so tight, car buyers are ready to pony up and pay sticker price.Reuters reported on the state of the industry on Monday and profiled a couple of dealerships caught in the middle of eager car buyers and too little inventory. It's a simple story of supply and demand: Automakers can't build enough new vehicles, due to chip shortages, and car buyers want them. In turn, many buyers have no problem paying sticker price and foregoing the wheeling and dealing that can knock a couple grand off the MSRP. Dealers get to keep even more cash in their pockets and buyers get their new car. Record profits ensue.

The best cars to buy used rather than new

This was originally published on Roadshow.

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