When it comes to car purchases these days, sticker price can be a sticker shock.
The prices for new and used cars continue to rise in view of the strong demand and the shortage of stocks. While the slowdown in production has improved slightly, there will be no return to normal for car buyers anytime soon.
“The typical dealer experience that consumers are familiar with – dealer lots with rows of cars, negotiating the price and lots of incentives – is unlikely to return this year as it is 4.5. are [million] 5 million consumers waiting on the sidelines for cars, “said Tyson Jominy, head of data and analytics at JD Power.
“This backlog will keep inventory levels low and prices high for most of 2022,” Jominy said.
An ongoing global shortage of microchips – key components needed to power today’s cars – that began in 2020 continues to slow manufacturers’ production of new vehicles, which has resulted in demand exceeding supply.
“It’s a little better in that there is no more inventory loss – it doesn’t get worse,” said Ivan Drury, Edmunds.com senior manager of Insights. “But we’ll talk to each other for many months until it looks more normal.”
The average transaction price for a new car is now higher than the manufacturer’s suggested retail price, or MSRP: $ 45,872 versus $ 45,209, according to the latest data from Edmunds.
An estimated 89% of buyers pay more than or within 5% of the sticker price, Jominy said.
One reason for the record transaction prices is that automakers have cut their discounts because they generally don’t have to offer big incentives to sell cars.
In other words, new cars don’t stay long in a dealer parking lot: in December, an estimated 57% of cars were sold within 10 days of delivery, according to JD Power. The average time it takes a new car to sell off the lot is a total of 17 days, a record low and less than 49 days a year ago.
Demand has also expanded into the used car market, where buyers are paying an average of $ 29,011, up 27.9% from a year ago, data from Edmunds shows. That ranges from an average of $ 14,124 for a 9-year-old car to $ 30,334 for a 3-year-old vehicle.
One bright spot, Drury said, is that demand for used cars has driven trade-in values well above normal.
“Buy this trade-in,” he said. “Don’t get rid of old assumptions about mileage or depreciation because all that stuff is on the doorstep.”
And while you should be prepared that there is little wiggle room on the price of the car, you may be able to negotiate the value of your trade-in.
In addition, interest rates are generally low at the moment.
“You can still get cheap money,” said Drury, adding that there are still 0% or 0.9% financing offers depending on the make and model you are looking at. Otherwise the average interest rate for a new car loan below 4%, according to Bankrate.
If you are flexible in terms of time when purchasing and cannot find what you are looking for on the dealer lot, it can be worthwhile to order your car.
“Although it can take four to eight weeks for the vehicle to arrive, it will be built to your exact specifications such as features and color,” said Jominy. “And now, some automakers will be incentivizing pre-orders that consumers won’t have when they buy what’s in stock.”