Why are prices on brakes going up in 2021November 15, 2021
You may have noticed that gas prices went through the roof recently, grocery prices are rising, and generally, everything is becoming a little expensive. Gasoline prices have increased more than 40% in just this year. Year-over-year prices have increased by more than 5%, according to the consumer price index, the largest price increase since 1991!
But why are costs rising, especially on food and energy? Does the pandemic have to do with it? How do rising prices affect you as a consumer?
Here is why everything is more expensive now
Indeed, the number one cause of inflation is the COVID-19 pandemic. And for multiple reasons. For example, both new and used car prices are have increased a lot - used cars went up more than 24% in costs! The new cars are costing more because there is a microchip shortage so cars can’t be built to completion… But the demand is high and because new car inventory is low, people are turning to used cars, driving up their prices too.
Another way the pandemic affected the automotive industry is by shutting down factories during the active lockdowns so less car models have been produced for the past two years. And, dealers aren’t keen to offer discounts so people are buying their new cars at sticker price.
Finally, we’ve all heard of supply chain issues. The common problems here are port congestions, and according to Goldman Sachs, more than 30 million tons of cargo are waiting for delivery. A statement from 21 North American organizations states that containers take days to unpack and fresh produce spoils, affecting grocery stores. Port congestions, delays and exponentially rising costs of container shipping are all applicable to other industries too, especially the automotive where many parts are being shipped in from China.
Are car parts prices going up?
Because of supply chain disruptions mentioned above, car parts are going up in cost too. The supply chain is so tight, that back ordered parts have been out of stock for weeks and months. The cost to ship a container from China increased from $3,000-$5,000 to more than $15,000-18,000, causing retailers to transfer the price increases onto the customer. And lumber shortages affected pallet production so there has been shortages of those too, affecting the quality and quantity of product that can be shipped. Labour shortages don’t help either, whether in port service or delivery truck driving.
What do I do if the prices are rising?
The economists do say the inflation is transitory so no need to panic just yet. A good idea is to not buy a new or used car at the moment, and lease instead if you really need a vehicle. In terms of car parts, make sure you take good care of your vehicle with regular maintenance so you don’t need big jobs done right now. Otherwise, lower your expenditures and ensure you have an emergency fund safety net, just in case.