Consumers in the market for a new vehicle are finally getting some much-needed pricing relief. The average price for a new car has been dropping for three straight months and just hit $45,600, down from a peak of $46,173 in July.
But, before you zoom off to the closest dealership, keep in mind that this comparatively lower price is still 33% higher than pre-pandemic levels. With many different factors at play, new car prices are likely going to fall a lot slower than they rose.
A Delicate Power Balance
There are many factors that contribute to the price of new cars. This is especially true over the last few years, which have been more turbulent than most. The balance of power has tended to favor automakers, with several factors leading to higher margins and profitability. But this trend might be starting to reverse.
COVID-19 induced supply-chain constraints, limiting the supply of new cars and causing prices to skyrocket. But in recent months, record-high inflation is hurting consumers’ spending power. On top of that, rising interest rates are making it more expensive to finance a new vehicle. For these reasons, many would-be buyers are delaying their purchases.
To decrease on-lot inventories, many automakers are starting to decrease prices and offer incentives again, such as low-interest financing.
Can You Do Any Better?
Auto executives express optimism that demand and production issues will keep car prices elevated for the foreseeable future. But if buyers continue to delay their purchases, then automakers will continue to lower prices and offer incentives.
For now, prices appear to be trending in the right direction for buyers. That said, if you can afford to hold off on purchasing a new car for another few months, you may stand to save even more.
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