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Vito and Phyllis Altamura stuck to what they knew when car shopping.

The Manhasset couples small four-door car, a 2014 Nissan Versa, died a few weeks ago, so they bought a 2021 Versa last week at Legend Nissan in Syosset.

Vito Altamura has been working from home in his internet marketing job since last March because of the COVID-19 pandemic, while his wife is a stay-at-home mom.

"Honestly, we didnt need to buy a car because were not going anywhere," said Phyllis Altamura, 50.

But they decided to replace their car because paying for rental cars and Ubers gets pricey, and they figured they would get a good deal on a new car, they said.

They were right but whats going on in the car sales business now is a two-sided story.

Average cost: $40,320

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After a pandemic-related decline in car sales last year due to months of dealership closings, high unemployment and manufacturers shutting down factories, car dealerships are seeing a big incease in customer demand for new cars, auto industry experts said.

But there is not enough supply to meet the demand, so prices are rising.

In fact, the average transaction price nationally in the first quarter of this year is expected to hit a record high of $40,320, said Jessica Caldwell, executive director of insights at Edmunds, an auto retail information company based in Santa Monica, California.

The average car price on Long Island is $42,756, according to iSeeCars.com, an online auto search engine company based in Woburn, Massachusetts.

There was an inventory shortage of 700,000 new automobiles in the United States this month, said Tyson Jominy, vice president of data and analytics at J.D. Power, a market research company based in Troy, Mich.

In January and February, retail sales of cars were up 5% compared to the same two months last year, he said.

"We could be doing even better than 5% right now if we had more cars to sell," he said.

The unmet demand is due to a number of factors, including more carless people deciding to forgo shared public transport, and others moving to areas where they couldn't easily get around without their own cars, said Karl Brauer, executive analyst at iSeeCars.com.

Other factors in the auto inventory issues include a global shortage of microchips needed for cars, and auto manufacturers trying to catch up on production numbers after temporarily closing factories due to the pandemic last year.

Luxury sales

While the unemployment rate is high, many consumers who have remained employed and working remotely have more disposable income since they werent able to spend it on concerts, vacations and other leisure activities over the last year because of pandemic-related business shutdowns, Jominy said.

Those mid- and high-income earners are buying cars expensive cars.

Sales of cars priced at $80,000 to $90,000 rose 90% in the fourth quarter of 2020 compared to the same quarter in 2019, and sales of cars priced at more than $40,000 grew 23%.

Overall high demand for cars and insufficient inventory have sent retail car prices rising 7% to 10% monthly, with prices rising $3,000 a month on average, Jominy said.

The good news for consumers is that the value of used cars is increasing, so they get more credit for trade-ins. Also, consumers are managing higher car prices by getting longer-term loans, taking advantage of low interest rates and using all or part of their federal stimulus payments for down payments, which is what the Altamuras did.

At Smithtown Toyota, sales were up about 17% in January and February compared to the same two months last year, said Denis Dagger, vice president and general manager. Last year was tough for the dealership, he said.

"If it wasnt for a strong fourth quarter last year, it would have been a total disaster," he said.

He is seeing shoppers being more conservative with their spending, he said.

"In other words, people arent going for all the bells and whistles," he said.

Chip supply worries

Not only is Legend Nissan getting less inventory from the manufacturer, but there are worries about the chip issue, said Wayne Siegel, co-owner of the dealership.

"If it wasnt for this chip factor, I think that we would see a tremendous uptick in business," he said.

Sales in January and February were down about 23% but that is only because sales during the same two months last year were so high, he said. Legend Nissans sales are going well now, Siegel said.

Tory N. Parrish covers retail and small business for Newsday. She has worked at the Pittsburgh Tribune-Review and Observer-Dispatch in Utica, N.Y.

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Car prices are up, and luxury is in demand - Newsday