I recently faced the decision as to what to do with an expiring car lease, which means that suddenly, the supply chain problems in the automobile sector became personal.

Old Habits Die Hard

I’ve always liked to lease my cars for four simple reasons:

• Leasing offers an opportunity for a nicer car for less;
• Maintenance costs are usually reduced depending on the length of the lease;
• Monthly payments are usually affordable, and
• There are often some tax advantages depending on how the deal is structured.

But let me tell you, the market has changed dramatically. And I learned about it the hard way.

As a result, I’ve taken a painful crash course on how the car business has changed in the last four years and I’d like to share my experience with you in hopes that you can avoid some of the difficulties I faced.

Moreover, the circumstances may be reflected simultaneously in both the stock market and the real world.

So, wait for it….

At the center of the mess is a combination of the supply chain problems facing the world and how what used to be a predictable business is devolving into a free-for-all.

The New Automobile Market Is All About Self Interest

In the old days, when in the market for a new or used car, I would make a few phone calls and give the agent at a leasing company an idea as to what I was looking for.

In a few days, I would go to the leasing agency, fill out a few papers, write a check, and drive home in my new car.

More recently, we’ve become accustomed to searching for a vehicle online and then making a few phone calls, emails, or exchanging texts. In some cases, after a bit of haggling the dealer or the leasing company would even deliver the care to your door and hand you the keys after a few signatures.

Alas, those days are over, at least for now.

The Supply Chain Monster Strikes

Enter the supply chain mess and now there are few or no cars on the lot, new or otherwise.

If you’re lucky, you can order what you like and the dealer or leasing company can have it shipped from another location in the same state.

Moreover, if you have a used car, even a leased one, it may have accrued some equity. And while that sounds like a good thing, and it is, it’s also a potential handicap these days.

That’s because some banks, like mine, won’t deal with the middlemen anymore due to the equity issues and what it means for their bottom line.

That meant that I had to do all the middleman work: buy the car from the bank, sell it to the middleman, and take the risk.

No sour grapes, but when it’s all done, one way or another, either the bank, the leasing company, or the car dealer, will turn around and sell the car to someone else for a huge mark up, even though I did a lot of the work.

Who’s Making Money?

I did a thorough review of numerous price charts in both the automotive and financial sectors as it seemed fairly natural that these areas of the market would be booming.

But what I found was a bit perplexing, as bank and car financing stocks, such Upstart (NSDQ: UPST), which specializes in buying car loans and Carvana (NYSE: CVNA), which sells used cars online are not doing all that well.

Moreover, a look at pure automobile manufacturers yielded very little in terms of bullish chart patterns.

For example, Ford (NYSE: F), General Motors (NYSE: GM) and even the ever-popular ADRs of Toyota (NYSE: TM) were at best forming new bases near the bottom of their trading range.

Even the shares of hip EV vanguard Tesla (NSDQ: TSLA), are displaying little interest from buyers these days.

All of which led me to the following conclusions:

• The supply chain problems for auto manufacturers are not likely to be resolved in the near future.
• This set of issues will impact car buyers personally for a lot longer than anyone expects.
• Bank strategies to maximize profits are not likely to be helpful either, and may be a sign that bank profits may actually disappoint in the future as the current situation will likely result in fewer sales and higher prices.
• The evolving geopolitical situation adds another layer of uncertainty.

Bottom Line

So, here’s what I learned.

We live in a highly interconnected and complex world, in which the infinite and intricate web of relationships between suppliers, manufacturers, financiers, investors, and John Q Public are not what they were even just before the pandemic.

Perhaps they may be irreparably broken.

There simply aren’t enough cars to be bought and sold at the moment even though demand is rising or at least unchanged.

Profit margins are being squeezed, and traditional relationships such as those between car dealers, leasing companies and banks have changed or are no longer in place as individual institutions look after their own interests first, and their customers’ somewhere down the line.

We the consumers are caught in this new maze, and in most cases are unaware of the changes in the system and their effects on our own situation and investments until faced with having to make a transaction in this realm.

At the same time, being informed and proactive will help you get through the barriers I’ve just discussed.

If you have a car lease that is coming up for renewal in the next few months, start looking at your options now. You may have some equity in the vehicle and this may work out to your advantage if you’re willing to be both patient and diligent.

Indeed, you may have to get out and beat the pavement and look for a vehicle the old fashion way, not as we’ve all become accustomed by going on a quick online search.

On the stock front, the automobile sector is not a particularly attractive place to invest at the moment, unless you’ve got a multi-year time frame and are willing to endure a lot of disappointment.

There are no winners in this. And In the end, the lack of supply will lead to lower sales and will hurt profits for all the participants in the automobile sector while increasing heartburn for customers.