Business/Economy

New cars are in limited supply in Alaska amid the microchip shortage. Prices for used cars are soaring.

The global slowdown in auto manufacturing has left many showroom floors and car lots in Alaska nearly empty.

Auto dealers say the situation follows a national trend that has boosted demand for used cars and trucks, causing prices of those vehicles to skyrocket.

They say the problem is unprecedented, and rooted in pandemic-related supply snarls that reduced the availability of microchips and other parts for new cars.

The situation is so dire that some dealerships along the Old Seward Highway in Anchorage have lined up their remaining new vehicles bumper to bumper along the road, highlighting what they have left. Behind the cars are mostly empty parking lots.

That includes Continental Auto Group, which sells several brands at four lots in Anchorage.

“It is definitely the first time any of us have experienced something like this,” said Marten Martensen, Continental Auto owner, on Friday.

Anomalies like the Japanese tsunami in 2011 disrupted auto manufacturing, but not to this degree, he said.

“And this is worldwide so everybody is facing the same dilemma,” he said. “And the crazy thing is there is absolutely no light at end of tunnel.”

The company usually has about 700 new vehicles on its lots. This past week, it’s been down to about 40, he said.

He’s all sold out of Subarus. There’s one Honda left, four Acuras and about a dozen Nissans.

Some new cars and trucks are trickling into Alaska, but not many, he said. And with those vehicles in short supply, Continental is scrambling to buy used cars it can sell.

“We put a lot of focus on trade-ins, asking every customer if they’d be willing to trade their car in,” he said. “And we’re paying a lot of money to get trade-ins.”

The shortage of new cars is prompting more people to keep their used cars longer, adding to the limited supply of those vehicles, said Neal Fried, an economist with the Alaska Department of Labor and Workforce Development.

New car prices rose about 5% over the last 12 months, he said. Used car prices in Alaska jumped an astounding 47%.

“That is pretty dramatic,” Fried said of the used car prices. “You usually just don’t see that kind of number for anything.”

The higher vehicle prices helped cause consumer prices in Alaska to rise by 6.2% over the last 12 months, the highest rate in three decades, he said.

Demand for used cars is up, Fried said. That’s due in part to low interest rates and federal stimulus checks that boosted income during the pandemic.

Fried says he’s spent several months looking for a relatively new Chrysler minivan to replace his 1998 model, without success. There’s not much to buy.

“I may be waiting for a while,” he said.

Jose McPherson, owner of Good Guys Auto Sales in downtown Anchorage, said he’s buying cars at auctions in the Lower 48, something he didn’t need to do before the pandemic.

Shipping the cars to Alaska adds expense, but there are more options Outside, he said. He’s keeping his lot full, including by selling some used cars on consignment.

“I’m buying cars where I can get them,” he said.

Alaska’s topsy-turvy rental market also reduced the availability of used cars, said Steve Sautner, owner of Dealers Auto Auction of Alaska, where dealers often acquire used cars.

Early last year, the rental companies thinned their inventory as it became clear the pandemic would halt tourism in Alaska, he said. Last fall, they had relatively few cars to sell into the used market, he said.

With tourism surging back, some car rental companies have snatched up used vehicles, along with Alaskans who rent out cars through Turo, the online car-sharing service, he said.

[Curious Alaska: How is the national shortage of car rentals affecting Alaska?]

Everyone is paying more for used cars, including his company. Still, sales are up at his twice-weekly auctions, he said.

“I’ve never seen this drastic of a swing in car prices,” Sautner said.

Used cars that aren’t very old can now fetch higher prices than their brand-new counterparts, said Martensen, at Continental Auto.

“I mean cars appreciating in value, that just does not happen,” he said. “It has never happened in the 25 years that I have been in this business.”

Martensen said the low inventory at Continental has forced him to carefully spread out his sales staff throughout the week so they all have opportunities to sell. He’s reduced hours at his lots as he waits for things to improve.

“At some point the inventory will return, so keeping our staff is really important to us,” he said.

It could be several months before auto manufacturing bounces back, said Les Nichols, owner of Fairbanks Nissan. But even if production reaches full capacity, it will take a while to refill the new car market across the U.S.

Nichols said he has a strong inventory of used cars, after stocking up over the winter.

He has only 24 new Nissans left. Normally, he has about 60.

“If you look at the math, I could be out of (new) cars in two months,” he said.


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