Due to lingering supply chain issues, car prices are higher than ever and are likely to remain elevated until at least 2024, making it a less-than-ideal time to buy a car.
Attention all prospective car buyers! Brace yourselves for a tough market out there. Car prices, both new and used, have been on the rise for quite some time now. While there is some hope in the recent cooling down of inflation for used cars, prices are still a far cry from returning to pre-pandemic levels.
According to current Bureau of Labor Statistics data, car prices have risen more rapidly and significantly since 2020 than at any other time in the prior 35 years. A CNN report, citing Edmunds.com, highlights that the average transaction price of a new car has grown by over $12,000 in the last five years, while used cars are still nearly $9,000 more costly than in February 2018.
Why are car prices rising so rapidly?
One explanation is that consumer preferences have evolved toward more extensive, expensive pickup trucks and SUVs. Furthermore, new car customers are piling on choices, pushing automakers to produce more costly vehicles. In the used automobile market, the drop in lease trade-ins and rental car firms competing with consumers for the same restricted supply of three- to five-year-old vehicles is also pushing up car prices.
Automobile consumers last saw car price increases like these in the 1970s and 1980s; the 2020s are unusual in that they increased by 45 percent over the pandemic’s worst 12 months in the used car market. Current prices in the United States have been consistent, albeit starting prices in some locations may be greater than others.
But here’s the bright side: used automobile inflation has slowed just as significantly since December 2022 as it had soared in the preceding months. On the other hand, used automobiles have a long way to go before reaching 2019 sales prices, while new car prices have yet to slow.
“[Prices are] coming down a bit, but not coming down nearly as fast as one would hope,” said Ivan Drury, the director of insights at Edmunds.com, told CNN. “If you look back, or if you’ve ever done a transaction before in your life, all of these numbers are bad.”
So, is it a good idea to buy a car right now?
Unless absolutely necessary, the response is an emphatic “no.” The road to lower new and used vehicle pricing is still paved with potholes. Depending on your situation, considering your options and making an informed decision is critical.
It really is up to each individual buyer to assess the benefits and drawbacks and decide what is best for them. Several experts recommend deferring purchases until the end of the year or possibly until 2024 when car prices are projected to normalize. Some advice is researching leasing alternatives or purchasing a secondhand automobile that is a few years old.
It is no secret that the current state of the car market could be better for buyers. Car prices have been skyrocketing for several years, and while inflation for used cars has been cooling down, there’s still a long way to go before prices return to pre-pandemic levels. If you’re in the market for a new car, it’s important to research and, consider all your options before purchasing.