As I have previously reported, the earthquake in Japan has caused major disruptions in production of various auto parts. Toyota has announced that it does not expect to be back to full production until November or December.
Even if this is accurate, and the return to full production is not longer, it means a full summer of very low auto inventories on dealership lots. Toyota and Honda will be hit very hard, but it, to varying degrees, will be a problem across the industry.
Analysts are already revising the SAAR down by half a million to 12.7 million for the US because of “worldwide shortages of key models” and that will get whacked again in a week or two as they think out the full implications of the lost production.
Significantly lower supplies will mean higher prices. It's basic supply and demand.
In addition to problems from the supply side, from the demand side, Bernanke's money printing will mean a lot more dollars bidding for the cars that will be on the lots. Most people haven't figured out the price implications of all this, yet. And auto dealers are just starting to, but if you are planning on buying a car this summer. Forget the summer, buy it now.
If you have a used car to sell, the opposite applies, wait things out if you can. The lower supply of new cars will result in higher prices for used cars. In addition, those new Bernanke dollars will also mean there will be more dollars bidding for used cars. If you can hold out selling a used car until August, you are likely to get a significantly higher price, somewhere, perhaps, between 10% and 25% higher.
Although I would think that the one moderating effect may be that most people take out loans to buy cars, and I continually read (and can attest anecdotally) that people are pretty tapped out when it comes to borrowing more money. It likely can't negate the double whammy of a shortage + more money, but may reduce the overall severity somewhat.
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