The car market is changing dynamically. Lack of chips, wiring harnesses or access to commodities is making it extremely expensive to buy a car and changing the rules of the game for everyone.

Car prices have risen by up to 50%
The word inflation registers with each and every one of us today as it affects us in every way. We see price rises practically every day on everyday items such as food and energy. On consumer durables such as an apartment or a car, we usually only notice price increases when we have the need to buy an apartment, house or car. These are not things we buy or sell every day. Anyone who hasn 't actively looked for a car in the last 2 years is now just in mute amazement at how extremely prices have risen. Let's take a look at why for some car models the price has gone up by as much as 50% what options we have to use this increase to our advantage.

Practically, clients do not get discounts on cars

Since the beginning of the COVID-19 pandemic, car manufacturers have been limiting car production through supply chain disruptions, mainly caused by the introduction and relaxation of lockdowns and other measures, which started to delay car deliveries significantly. The longer the pandemic lasted, the more pronounced the vehicle delivery problem became.
On the basis of higher demand compared to supply, car manufacturers started to raise the prices of cars, and even the manufacturers' discount policy was not exempted from regulation. Cars started to increase in price by tens of percentages, and many people started to postpone the purchase of a new car. Car manufacturers had to adjust production capacities to take account of the availability of materials, which reduced production even further. The result was that, although demand for new cars decreased significantly, demand remained higher than the available supply. As a result, delivery times stretched to more than 12 months for some models. With the end of the pandemic in sight, everyone was expecting the situation to return to normal. However, this did not happen.

There is a shortage of materials

In February 2022, war broke out in Ukraine. Car manufacturers had not yet recovered from the chip crisis caused by the pandemic and now faced a new challenge in the form of a shortage of wiring harnesses or sheet metal. In fact, Ukraine is a key supplier of wire harnesses to all major car manufacturers in Europe. Currently, production is ongoing in a limited form, but capacity has shrunk considerably and the stocks they have available are getting smaller by the day as supply is complicated. This is also why some car manufacturers are already suspending production, as they cannot complete the cars they produce.Russia, on the other hand, is an important supplier of iron ore, which was processed in Ukraine into sheet metal, which was then used to make car bodies.

Automakers are interrupting production

This is also the case, for example, of Volkswagen's Bratislava plant, which has been forced to cut production several times and is generally preparing to reduce the volume of vehicles produced. This is because the wiring harnesses are needed directly as part of the vehicle production process and cannot be assembled later when the vehicle is completed, as was the case with some additional equipment items due to the lack of chips.

The new strong wave of COVID in China is not helping the situation

Another factor strongly influencing the rise in car prices is the severe lockdown in China, where the COVID-19 omicron variant has caused several months of closures of major industrial areas. China's zero-tolerance policy against COVID has thus put even more pressure on our wallets. The result of all this has been the extreme increase in the price of vehicles, the reduction in model ranges and the transformation of car manufacturers towards the production of electric and hybrid vehicles. Most standard car manufacturers were already prepared for the electrification of their vehicles before the pandemic, but the pandemic has accelerated this transformation and the race is on among car manufacturers to see who will be the first to dethrone the world's largest electric car manufacturer, Tesla.

The car is becoming a luxury

This shortage is seriously affecting production capacities across Europe, putting even more pressure on the production price of the car itself. The car is already becoming a luxury good that is unaffordable to the masses. The situation is becoming similar to what we remember before the year 2000 in our own country.

Automakers are changing strategy

The pandemic shows us that the just-in-time manufacturing-supply process is proving to be ineffective in the event of supply chain disruptions, and carmakers will need to come up with a solution to keep raw materials and parts in stock as soon as possible. However, this will make production considerably more expensive. There is likely to be an even more significant impact on car prices in the summer and autumn months of this year. Car manufacturers are also focusing on how to open production plants for various components directly in Europe as soon as possible, in order to reduce their dependence on Asian suppliers in particular and thus be more self-sufficient.

Prices of used vehicles are rising rapidly

The last year has also seen strong price increases for second-hand vehicles. Those of us who bought a vehicle 2-3 years ago are simply able to sell it for the price they bought it for, if not accidentally even more expensive. It is a paradox because a car is a consumer good and wears out considerably with use. However, deferred demand, which grew during the pandemic, is now pushing up car prices, even taking into account the other factors we mentioned above.

So how to get to the car and not overpay?

The way out of this situation can be for people and companies to rent a car, when the worries with the acquisition of the vehicle and the overall operation falls on the head of the service provider. Whether renting a vehicle for short-term, medium-term or operational leasing can be the ideal solution in the truly uncertain and economically untenable situation the car market finds itself in today. It is important to be able to find your way around, which is why we recommend taking the time to browse through the online offers.

Interest rates are rising, leasing is getting more expensive
With the rising cost of bank interest and virtually all the upfront costs associated with using vehicles, it is highly likely that the cost of renting, leasing or operating leases will also rise rapidly. We therefore recommend that you order your vehicle as soon as possible. The cost of money, i.e. interest, is one of the essential components of the cost of a car. By making money more expensive, owning a car is and will become even more unaffordable. However, how do you navigate the supply and is it even possible to find vehicles when there is a 12+ month wait?

How do you choose when cars are in short supply?
On the internet today you will find a multitude of car rental providers or providers of operating lease providers. Customer priorities are changing today. The most important factor when choosing a car today is its availability and price. The customer no longer has a choice when it comes to defining the desired car equipment. Because the specific options are limited and the more narrowly the configuration is specified, the longer the customer will wait for the car. It can be as long as a year or a year and a half. It is therefore ideal to choose a vehicle from stock and according to actual availability. If you can contract online so you don't have to go anywhere, that's just an advantage that several of us quickly got used to during covid. This way you can compare what's important to you in the comfort of your home or work. Availability, price or vehicle equipment.

How do order a vehicle online?
The entire process of ordering a vehicle takes place in the online space. The customer chooses the vehicle that suits them best, whether in terms of size, price, engine or equipment. However, the customer should think in advance whether they only need the vehicle for a short period of time or whether they will be using it for a longer period of time. As is the case, for example, with apartment rentals, the longer the rental period, the more favourable the price for the customer. If the customer also has the option to sign a contract with a specific term of 6, 12 or 36 months, they will get even better terms. So, once you have thought about how long it is ideal for you to lease a vehicle, you choose one of the predefined monthly mileage and the contract term itself. The most important thing to consider, therefore, is for what purpose you need the vehicle. Whether small, large, limousine or SUV, with a smaller or larger trunk, van, etc.

Once I know what kind of car, what's the next step?
The next step is for the customer to fill in their personal or company details and a quote will automatically be emailed to them, telling them if a deposit is required for the vehicle. In the case of a corporate client, the security will be determined by an algorithm after evaluating the applicant's financial indicators. As the value of the vehicle normally starts at € 20,000 and normally reaches € 100,000 for luxury cars, it is important to evaluate the creditworthiness of the client, just as in the case of a bank mortgage, and also in the case of a car rental. The algorithm therefore takes into account the client's mainly active liabilities, checks the foreclosure records and also verifies whether there are any insolvency proceedings pending against the client. In the case of natural persons, it is necessary to provide, for example, a bank account statement or an employment contract.

Don't I have to worry about anything?
As a modern alternative to buying a vehicle, operating leasing services ensure that the customer can use the services without worry. As part of the monthly rental fee, services such as compulsory insurance, accident insurance, vignette, assistance service or, in the case of a wider range of services, seasonal change and service maintenance are included.

The advantages of an operating lease over a standard vehicle purchase are, among others, in an operating lease:

Payment of 1 month's rent with services included
signing the contract remotely and digital acceptance/delivery of the vehicle
100% tax deductible rental expense without any burden on the balance sheet for companies
professional and comprehensive care
24/7 support for drivers

In the past, it was believed that operating leasing was a service primarily for entrepreneurs. It was a form of efficient fleet optimization. Today, in addition to entrepreneurs, operating leasing also appeals to natural persons, i.e. ordinary people. Operational leasing is therefore popular with customers who want to concentrate on more important things for them and leave the care and worry about their cars to professionals. The service is tailor-made for anyone. "Whether you're looking for a vehicle for your business, yourself or your family, you're a sole trader looking for a vehicle essential for your business or you need to provide fleet management for your entire company. Operational leasing service will save you a lot of time, effort and money," revealed the CEO of AVIS, Juraj Šulhaň.

See what vehicles you can order online and have at your disposal.

Contact

If you are interested in our offer or would like to learn more about our services, please contact us at +421 900 200 200 ( this line is charged at 0,60€/minute incl. VAT), or send us an email to info@avis.sk.

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