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For buyers in the market for a new or used vehicle, prices continue to rise.
Car prices and interest rates are higher, driving up costs for drivers. But experts say pent-up demand has caused cars to migrate off parking lots, meaning dealers don’t have much reason to offer discounts.
“What’s really driving these prices is lower inventory than before,” said Jessica Caldwell, head of insights at Edmunds. “Consumers aren’t necessarily getting the massive discounts they once had.”
The annual percentage rate for auto loans jumped in the third quarter. after to Edmunds. The annual percentage rate on loans for new vehicles rose to 7.4% and for used vehicles to 11.2%, both levels last seen during the Great Recession.
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Rising tariffs contributed to higher costs. According to Edmunds, the average monthly payment for a new vehicle was a record $736 in the third quarter, up from $733 in the second quarter. For used cars, the average monthly payment fell slightly from $569 to $567.
There is still pent-up demand in the automotive market from drivers who postponed purchasing new vehicles in 2020 but are now looking for new vehicles despite high current costs.
“We’re getting to the point where people just can’t hesitate anymore [purchases] longer; They’re coming back on the market,” Caldwell said.
Fewer discounts, cars available
It is still too early to say whether this is the case The United Auto Workers strike is impacting car prices, Caldwell said. Furthermore, the strike is likely to affect only a relatively small number of vehicles compared to the entire automotive market.
Car buyers are instead seeing the impact of a low-inventory, high-demand market that leaves little to no room for discounts, experts say.
In the past, new model year vehicles arrived on a dealer’s lot by the end of the summer to replace older inventory. At this point, dealers had the motivation to offer discounts on leftover older models.
However, there are “no leftovers” this year, said Tom McParland, referring to vehicles that serve the average consumer. McParland is a writer for the automotive website Jalopnik and operator of the vehicle buying service Automatch Consulting.
“There’s actually no such thing as a leftover 2023 Sienna Hybrid because these cars are sold six to nine months before they even arrive at dealers,” he added.
Car buyers also saw few comparable end-of-summer sales last year due to a chip shortage that reduced production levels, Caldwell added. The shortage of semiconductors during the pandemic led to a significant decline in vehicles produced and cost the auto industry billions of dollars in revenue.
Cars aimed at the average consumer, such as sedans, crossovers and hybrids, are finding it difficult to get deals because of high demand and slow production, McParland said. On the other hand, there are remaining offers for luxury electric vehicles because these cars have been sitting around, he added.
However, there are some exceptions; Buyers may see more inventory for different vehicles. Electric vehicle availability was well above the industry average in early October as product availability and production of electric vehicles increased rapidly. after to the automotive service provider Kelley Blue Book.
That leaves room for business in an inventory-heavy market, McParland said.
“It is absolutely a good time to look at the electric vehicle market, both new and used,” he said.
Additionally, Tesla’s recurring price cuts this year could also lower prices across the electric vehicle market, Caldwell added.
The average price of an electric vehicle was $50,683 in September, down from $52,212 in August and down from more than $65,000 a year ago Kelley Blue Book.
Used electric vehicles are more likely to be priced under $25,000, which would give the car buyer an additional $4,000 federal tax credit.
However, drivers purchasing a used vehicle should keep in mind that while electric cars don’t have as many parts as gasoline cars, it remains difficult to predict how long their rechargeable batteries will last.
Electric vehicles from five years ago or 2018 “were not as good,” Caldwell said, particularly in terms of range and charging efficiency.
Shopping Tips for a Low-Inventory Auto Store
Overall, it is unlikely that overall car prices will fall significantly in the future. The technology being built into vehicles will continue to drive prices higher “as we move toward electrification and autonomous technology,” Caldwell added.
“These technologies are expensive.”
If you are currently looking for a new or used car, do your research before heading to the dealer to make the best decision. Here are three tips:
- Get pre-approved for a car loan. Dealers don’t always offer this most competitive financing. Shop for financing online at your private bank and other local financial institutions and credit unions to see what type of loans and interest rates you can get, Caldwell said.
- Buy both new and used. Broaden your research to increase the likelihood of finding good deals that fit your budget. If you’re new to a used car buyer, looking at certified pre-owned vehicles can give you peace of mind, Caldwell said.
- Research trade-in values. If you’re trading in a vehicle, get quotes from different sources and dealers and try out different valuation features. “Definitely shop around and make sure you don’t leave money on the table,” she said.