Why the car market could still be insane for months.

This is a historically terrible time to buy a car.

The entire auto industry has been hobbled for months by the worldwide shortage of semiconductor chips, which has prevented manufacturers from producing enough vehicles to meet the demand from Americans eager to spend their pandemic savings and stimulus checks. As a result, many dealerships are practically barren of inventory, and new rides are fetching record prices.

The cost of used vehicles, meanwhile, has rocketed into the stratosphere, F9-style. On Tuesday, the Department of Labor reported that the retail price of pre-owned cars and trucks jumped a record-breaking 10.5 percent in June, after rising 7.3 percent in May and 10 percent in April. It doesn’t matter if your heart is set on a tricked-out new Ford F-150 or you just want a lightly used Honda Civic to inconspicuously cart you from point A to point B. The market is brutal for everybody.

How long will we be stuck with these shortages? Is the car biz’s COVID hangover destined to linger on? Or will the industry, like the rest of our once-dreary-eyed economy, soon return to normal? When I asked, industry analysts told me that shoppers will likely have to wait until 2022 for the auto industry to settle, though exactly when is hard to say. Some of the pain, especially in the used car market, could begin to ease up earlier. But it could be well into next year before prices fall back to earth and customers see the sort of selection they’re used to at dealerships.

“I think we should see a little bit of relief by the end of the third quarter,” Jessica Caldwell, executive director of insights at Edmunds.com, told me. “But it will take time for chips to make their way into vehicles and vehicles to make their way into the market. And that’s why we aren’t out of the woods yet.” Charlie Chesbrough, a senior economist at Cox Automotive, agreed: “There are more and more folks saying it’s going to take a few quarters or a year to get back to those more normal levels” of inventory.

The automotive sector’s current troubles date back to the start of the coronavirus crisis, when car manufacturers shut down their factories and canceled orders from their suppliers, including chip-makers, in the face of nationwide lockdowns. Instead of waiting around for Ford, GM, and the rest to restart production, semiconductor firms simply went and found new customers, selling more product to smartphone- and other electronics–makers whose business was suddenly booming.

Once the auto companies turned their assembly lines back on, they discovered that there were no longer enough chips to go around. The shortage effectively kneecapped their ability to produce cars, since modern vehicles are heavily computerized, with each containing thousands of chips.

“If you’re at a party, and you leave the room for a while, there’s no guarantee that your seat will still be there when you return,” Bernard Swiecki of the Center for Automotive Research told me. The auto industry, which is a relatively small customer for most semiconductor-makers, effectively lost its seat at the bash. “Nobody out of the goodness of their heart is going to hold that capacity just for you.”

The industry’s chip famine has forced automakers to idle plants and cut back production throughout 2021, while scrounging for pieces of silicon wherever they can find them and occasionally cutting features like wireless phone charging to economize their semiconductor rations. The situation has been exacerbated by a fire at a Japanese chip-maker and the winter freeze in Texas, which put further strain on the world’s semiconductor supply.

But some companies have been hit harder than others. Ford, for instance, said it would likely have to miss half its second-quarter production this year, and its sales in June fell by 26 percent. The giant at one point resorted to cranking out thousands of its money-making F-150s without their essential chips, and stocking them away for later in a giant parking that could be seen from space. GM, on the other hand, has generally seemed to do a better job “working its suppliers and any conceivable source of chips,” as Bloomberg put it, which has helped it and reopening plants.

The automakers have enjoyed at least one silver lining in all this: Their profits have boomed. With so few cars and trucks for sale and customers flush, dealers haven’t had to mark down the prices on vehicles in order to get rid of extras on the lot. But car sales dipped in both May and June thanks to historically low inventory, and investors and analysts are worried that the “supply crisis” could start to weigh on the industry if it isn’t solved.

The shortage of new cars has had the knock-on effect of sending used car prices soaring to unprecedented heights, so that some owners are finding that their older-model vehicles are now worth more than when they were purchased. The specific factors involved are varied and complicated. Rental car companies, for instance, aren’t selling their older fleet models back to dealers, because they can’t get new replacement sedans or SUVs. The customers who’ve been pushed out of the new car market are often wealthier, and so they can afford to spend more. There also appears to be a lack of cheap, much older vehicles on lots, because car sales were depressed in the aftermath Great Recession. But most of the factors flow from the chipocalypse and general dearth of new cars.

It’s not entirely clear at this point whether the worst of the chip shortage is fully behind the industry, or how long the problem will take to fully solve. Just recently, Audi’s CEO said that the issue could dog the company until the end 2022. Based on those kinds of announcements, Swiecki told me that he’s concerned that “the root solution seems to be trending further off in the future rather than closer.”

Dan Hearsch, a managing director and supply chain expert at AlixPartners, told me that, like many in the industry, he believes that by September or October car companies should be able to start ramping up production enough to at least begin filling backorders and easing shortages of new vehicles a bit. He said it was based on the fact that there is typically a nine-month lag from the time a car company tells its suppliers it will need parts to when they arrive, and the auto industry only really started to confront its supply-chain issues this past winter. But it will likely take well into next year to get inventory at dealers back to more typical levels. The reason why? Simple: There’s a limit to how fast assembly lines can run. “They can’t run two times or three times as fast” as usual, Hearsch said. What’s more, even if chips finally become plentiful, other bottlenecks could slow down production if, say, wheel or engine-part factories can’t keep up. The auto industry has to work in synch like an orchestra, or it doesn’t really work at all. “All of those accelerations have to be very well coordinated. And that’s hard to do,” he said.

As for used cars? Nobody seems to think their prices will crash back to earth until the new car market is back in shape. But there are at least signs that they might at least be about to plateau, and could even give up some gains. Though retail prices for used cars increased in June, the wholesale prices dealers pay for vehicles at auction fell. And because retail prices tend to follow consumer prices, that could mean used car prices have at least peaked. Earlier this month, Cox’s chief economist suggested they might even decline by 9 percent by the end of the year.

If so, that might help soothe the nerves of economic policymakers, especially at the Federal Reserve. Recently, used car and truck prices have been the single biggest component driving the recent burst of inflation America has experienced; in June, they constituted more than one-third of the entire increase in the Consumer Price Index. If the cost of used vehicles simply levels off, it would help cool off the next few months of inflation data—and possibly reassure a few central bankers who might otherwise get an itch to start tightening monetary policy to slow the economy a bit.

But that still means consumers could face sticker shock at the car lot for the foreseeable future. I asked Dan Fiorani, an analyst at AutoForecast Solutions, if car buyers could at least look forward to some of the seasonal sales they know and love, like a December to Remember or Toyotathon. “They’ll still have those events, because that draws people into the dealerships, but your selection is going to be lower than it has been in many, many years,” he said. For car shoppers, this might be a December to forget.