The prices of new and used cars keep on rising. Don’t expect relief soon
When it comes to buying a car these days, the sticker price can mean sticker shock.
New and used car prices continue to climb amid strong demand and tight inventories. While a manufacturing slowdown has improved slightly, there won’t be a return to normalcy anytime soon for car buyers.
âThe typical dealership experience that consumers are used to – walking through dealership lots with rows and rows of cars, negotiating the price and getting lots of incentives – probably won’t return this year because there are. 4.5 [million] to 5 million consumers on the sidelines waiting for cars, âsaid Tyson Jominy, data and analytics manager for JD Power.
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âThis pent-up demand will keep inventories low and prices high for most of 2022,â Jominy said.
A continuing global shortage of microchips – key components necessary for today’s cars to operate – that began in 2020 continues to slow the production of new vehicles by automakers, resulting in demand exceeding the offer.
âIt’s slightly better in the sense that there is more of a drop in inventory – it’s not getting worse,â said Ivan Drury, senior director of information for Edmunds.com. “But we’re still talking about many more months until it starts to look more normal.”
The average transaction price for a new car is now higher than the manufacturer’s suggested retail price, or MSRP: $ 45,872 compared to $ 45,209, according to the most recent data from Edmunds.
It is estimated that 89% of buyers pay more than or less than 5% of the sticker price, Jominy said.
Part of the reason for the record transaction prices is that automakers have lowered their discounts because, generally speaking, they don’t need to offer big incentives to sell cars right now.
In other words, new cars don’t hang around for long once they arrive at a dealership: In December, around 57% of cars sold within 10 days of delivery, according to JD Power. The average time, overall, for a new car to sell from the lot is 17 days, a record from 49 days a year ago.
Demand has also spread in the used car market, where buyers pay an average of $ 29,011, up 27.9% from a year ago, according to data from Edmunds. This ranges from an average of $ 14,124 for 9-year-old cars to $ 30,334 for a 3-year-old vehicle.
One bright spot, Drury said, is that demand for used cars has pushed trade-in values ââwell above par.
âShop this exchange,â he said. “Don’t go with the old assumptions about mileage or depreciation because it’s all at the door.”
And while you should be prepared that there is little wiggle room on the price of the car, you may be able to negotiate the value placed on your trade-in.
In addition, interest rates are generally low at this time.
âYou can still get the money at a low price,â Drury said, adding that there are still 0% or 0.9% finance deals available, depending on what make and model you are considering. Otherwise, the average interest rate for a new car loan is less than 4%, according to Bankrate.
If you have flexibility in when to buy and can’t find what you want on dealer lots, it may be worth ordering your car.
âWhile it may take four to eight weeks for the vehicle to arrive, it will be built to your exact specifications, such as finish and color,â Jominy said. “And now some automakers will be offering pre-order incentives that aren’t available to consumers buying what’s in stock.”