- Lots of shoppers have car-buying on their mind as the end of the year approaches.
- Experts say it’s a better time to buy than last year, but there are still things to look out for.
- Interest rates are defining this year, experts say.
If you’re in the market for a new or used vehicle before the end of the year or early 2023, industry experts have tips to get the car you want at a decent price.
This time in 2021 was a terrible time to buy a car, but now the tides have turned a bit.
Easing supply chain crises mean more vehicles on lots, used vehicle prices are down, and demand is normalising. That’s left 57% of consumers either ready to buy or with a model in mind, according to a Cars.com survey.
But there’s a new ghost haunting this end-of-year buying season: skyrocketing interest rates, experts say.
“You’re not having to compromise in every which way, shape and form,” Ivan Drury, Edmunds’ senior manager of insights, said. But, “Today’s interest rates are so high that it has become cost prohibitive in a way we’ve never seen before.”
What you can do about sky-high interest rates
Unfortunately, the answer is: Not much.
“There’s really not a lot of ways to escape them unless you are willing to change the car that you’re buying,” Drury said.
“On top of that, you’re probably looking at monthly finance terms of 36 and 48 months versus what most people want to do, 5 to 6 years,” he added. That’ll likely lead to more people delaying their purchase.
But the backlog of people who’ve already been putting off their vehicle purchase since early in the pandemic might have no choice but to shop right now, which will keep demand steady.
Because of that, “I don’t know when it’ll let up for anybody until inventories for new cars get so high, the automakers decide to bite the bullet and just throw out incentives,” Drury said.
New cars are more expensive than ever
The average new vehicle transaction price hit a record high of $48,681 in November, according to Edmunds, and luxury buyers were willing to pay up to $67,050. Drury still expects an end-of-year luxury push, but at a cost.
“BMW, Mercedes, Lexus, Audi — they don’t really have finance deals anymore,” Drury said. “That’s just making these monthly payment numbers even more shocking.”
Even without the widespread inventory shortages that dealerships saw throughout the worst of the pandemic, car-buyers are still paying above sticker price for non-luxury vehicles.
“If you look at the lower price ranges, really anything $50,000 and below — which is still not a small amount of money — there are still premiums,” Drury said. “They’re still seeing people pay $1,500 extra for just a basic sedan.”
What new cars to look for
“If you’re not buying a luxury car or an electric car, you may be in a much better position in terms of the price,” Brian Moody, executive editor at Kelley Blue Book, told Insider.
As far as luxury cars go, there aren’t many deals to be found, he added.
“Maybe looking for something that’s off the beaten path, not a full-size pickup, not an SUV, not a minivan — maybe something like a sedan or a hatchback is a way to get the features that you want, but at a lower price , he said.
Plan to move quickly and consider used
Vehicles are still moving quickly, Zack Krelle, industry analyst at TrueCar, said.
He recommends doing your research on what model is best for you ahead of time.
“Be as educated and prepared as you can ahead of time to kind of avoid those scenarios where you get excited about a vehicle and it turns out it’s sold before you can arrive at the dealer to go see it,” he said.
Some brands are sitting on more inventory than others. Ford, Chevrolet, Ram, and Jeep had about 300,000 vehicles advertised for sale in early December, according to data from S&P Global Mobility.
Among luxury brands, Mercedes-Benz and Lincoln still showed the most remaining 2022 vehicles in dealer advertised inventory.
Car-buyers might find a used vehicle that could suit their needs while they hold out for lower prices surrounding new vehicles.
“If you’re looking for a new vehicle,” Krelle said, “you might have an opportunity to find a used vehicle that could be a good fit for your budget and your lifestyle for a while.”