In the market for a car? Driver beware.
With increasing demand and falling supply, new and used cars are more expensive than ever as car dealerships are making record profits.
This situation has produced some sobering numbers for car buyers: the price of new cars has risen by 30% compared to 2002 and the prices of used cars are now 43% above expected normal levels, according to Return to CoPilot Normal Index. And with interest rates rising for the fifth time this year, you can expect the sticker shock to make your hair stand on end.
Related: The Fed Raised Interest Rates Again. Here’s what it means for your wallet.
What is happening? For one, there is a shortage of semiconductor chips, which control most of a car’s electronic functions. And fewer chips mean fewer machines.
Second, the auto industry has yet to recover from the pandemic as manufacturers have slowed production, not anticipating increased demand, thanks to stimulus controls and people unwilling to use public transport.
“The combination of the two basically means that the industry produces four or five million fewer cars annually than they could sell,” says Pat Ryan, CEO of CoPilot, an app that searches every dealer to find the best prices for. cars.
But with some inside information, you can overcome these traffic dangers. Ryan offers strategies for car buyers in 2022.
1. Be patient
While new car prices are rising at a slower pace in 2022, they continue to hit record highs. Retailers are raising their prices, sometimes nearly $ 10,000 above the recommended price. But Ryan believes the situation will improve in 6 to 12 months. “The longer you wait to buy, the more savings you’ll get,” he says. “Every two or three months you hold out, you’re improving yourself a notch in terms of price.” Again, this will change as there is more stock and the dealership lots are full, but right now it’s a seller’s market.
2. Look at used cars that are one to three years old
If you absolutely have to buy a car in the coming months, you may want to keep an eye on the near-new market cars.
“Over the past 45 days, the prices of cars between the ages of one and three have fallen by about 3.6%,” reports Ryan. Even cars between the ages of four and seven are slowly returning to normal, albeit barely. They are down by 1.5 percent.
3. Consider SUVs and wagons
According to CoPilot data, some types of used vehicles are closer to returning to their normal prices than others. For example, the cost of SUVs dropped 10% last month, most likely because shoppers are moving away from gasoline consumers. Wagons and minivans are also slowly returning to their normal price.
But the more expensive vehicles include compact cars, fuel-efficient electric and hybrid vehicles. Interestingly, used Ram vehicles are selling 34 percent above normal levels, according to CoPilot’s Used Car Price Index.
4. Go home
Sure, the cost of cars is completely out of control no matter what you buy. But if you dig a little deeper into the numbers, you see some interesting disparities. Take domestic and foreign cars. According to CoPilot, the average price of a domestic used car averaged $ 8,301 in August, down 12% from July. Meanwhile, the cost of used foreign cars hasn’t moved. They are still 44 percent above expected normal levels.
Some high-volume brands, such as Ram, Chevrolet, and Ford, remain way above their normal price. On the inside, Toyota, Honda and Subaru are the most important items. You may want to look at less inflated brands like Pontiac, Saturn, Isuzu, and Mitsubishi.
5. Financing with credit unions
With interest rates on the rise, paying cash for your car is the best plan of action. But for most people, it’s not a reality. The next best option is to secure financing from a credit union, which offers lower interest rates. Once your budget is calculated, you can base your financing on what you can afford to pay per month.
6. Take advantage of your old car
Remember, this is a seller’s market. If you have a car to trade in or sell, you can leverage its value against the rising cost of vehicles. You can also use that old machine to upgrade to something more fuel efficient with updated features.
“It’s like when you see a very hot real estate market,” says Ryan. “If you don’t own a home, it’s hard to get in. But if you own something with an appreciation and you can shift your profit from one end to the other, it makes it cheaper.”
This can make navigating the automotive market much more enjoyable.