A Trio of Factors
If you’re in the market for a new or used car, then a hefty price tag could be in your future. This is thanks to a trio of factors forcing car prices higher.
These include higher interest rates, which increase the cost of borrowing, a shortage of auto parts, and strong demand for cars, which reduces automakers’ incentives to offer discounts. In other words, car prices are high due to the fact there are plenty of buyers, but not enough cars.
On top of that, since new car prices are higher than normal, people are holding onto their cars longer. This further reduces the number of used cars for sale, and drives prices up even further.
Thinking About When To Buy
If you’re in the market to buy a new car, you might want to consider holding off for another few months. If you purchase a car now, you will likely overpay for a car that you may be able to get at a much lower price in the future.
This also applies if you plan on financing the purchase of a car, since the cost of borrowing is getting more expensive. In the third quarter of 2022, the average interest rate for a car loan hit 5.7%. According to Edmunds, that’s more than 1% higher than what the average was in August 2021.
What To Do?
Luckily for consumers, this is more of a short-term crisis, as opposed to a long-term reality. Industry insiders expect car prices to stabilize once car production levels return to normal in the second half of 2023.
At that point, there could be significantly more cars on dealer lots and automakers will be incentivized to sell their inventory. To sell more cars, they will likely lower prices while offering discounts and other deals.
If you are looking to buy as soon as possible without drastically overpaying, you might want to consider a pickup truck. Most models are made in North America and, therefore, could reach full production capacity more quickly, since they don’t rely on a global supply chain.
There has been a lot of pain this year for consumers looking to upgrade their ride. The fortunate thing is this short-term trend won’t last forever.
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