How the 2023 Automobile Market Looks Now
Purchasing a car can feel like riding a rollercoaster of emotions. Much like buying a house, it requires a fair amount of research, compromise, and grit before arriving at a deal. Despite the challenges, making some preparations will make the entire process a little less harrowing.
If you’ve been thinking of buying a car, know that things have changed. This week, First Florida Credit Union has compiled a brief primer on how the auto market has evolved over the past few years.
Auto Inventory Is Improving, but Still Limited
The coronavirus pandemic and its lasting effects caused a shortage in labor and supplies across many industries, and the automotive sector was no exception. Kelley Blue Book notes that new car purchases decreased significantly in 2021.
As economies around the globe and their respective workforces recover, the available inventory of automobiles has begun to stabilize as well. However, Kelley Blue Book has observed that many automakers and dealerships plan to keep the supply of cars low to create more opportunities to charge higher prices.
What does this mean? Dealerships are at an advantage to capitalize on the premiums that “limited availability” grants.
If you already have your heart set on a specific make and model, expect to pay more for it. Additionally, a dealership might have the car you want, but not necessarily all of your desired features.
You might have to wait longer for your dream vehicle to appear. Some dealerships might allow you to place an order for a custom configuration, but that could increase your wait time and inflate the final price of the car. Alternatively, you might have to visit multiple dealerships before finding the car that best matches your needs.
Much Like Everything Else, Auto Prices Are Rising
You aren’t hallucinating: the cost of everything is going up, and the auto industry is also being affected.
As mentioned before, some of the increases are caused by the impacts of a recovering economy. Fewer cars are being produced, and the reduced inventory is affecting pricing. But supply-and-demand economics aren’t the only things at play here.
Kelley Blue Book emphasizes that while new car prices are on the rise, manufacturers are also shifting towards making more “premium” features the standard to justify the cost.
Features that are now becoming standard include:
- Blind spot assistance
- Backup cameras
- Adaptive braking
Not to mention, the fuel economy of new cars is improving. So while a higher cost upfront is expected, so too is a longer service life with enhanced safety.
There could be some opportunities to save, but not by much. Edmunds notes that for much of 2022, car buyers paid $600-$700 above MSRP, with that difference dropping sharply by December that same year. Deep discounts don’t appear to be an incentive that dealerships are offering, either.
Edmunds recommends buyers be very flexible and responsive when buying a vehicle. Consumers should compare multiple dealerships to find the best price. Furthermore, compromising on your preferred make, model, and features might also be necessary.
Used Cars Are Not Necessarily a Cheaper Alternative
Expect a higher price for a pre-owned car too. Another astonishing finding from Kelley Blue Book is that the average age of a vehicle is roughly 12.5 years old. American motorists are holding onto their cars longer than before. This means the frequency of trade-ins is decreasing, which is affecting inventory.
On the other hand, the trade-in value of vehicles is rising to make that type of transaction more attractive. Depending on the dealership, you might get a higher trade-in value for your car.
All in all, comparison shopping will pretty much be a requirement, whether you aim to buy a new vehicle or trade one in to cover a down payment.
There is some volatility when it comes to trade-in value, however. The value of your car may rise or fall drastically from month to month, so depending on your situation, now might not be the ideal time to consider making a trade-in offer.
Plan To Save for a Higher Down Payment
Speaking of down payments, Edmunds is predicting that the amount of money needed to cover one is also steadily increasing. Prices of new and used autos are on the rise, which also means you will be expected to pay more upfront to keep monthly payments manageable.
If you have multiple savings priorities, then covering the cost of a car adds another challenge to your finances. In these instances, consider whether buying either a new or pre-owned vehicle best suits your needs at this time. Use a payment calculator to gain perspective on monthly payments.
Buying a car should be an exciting experience. However, it is also critical to be prepared and grounded during the entire process. By knowing the current market and what to expect, it is possible to find the car you need without paying too much.
If you’re ready to start shopping for a vehicle, First Florida highly recommends visiting your financial institution to discuss your financing options. Starting there can make your shopping experience a bit easier.