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By David Payne, Jim Patterson

published 20 July 2023

The Evolving Auto Market: What You Need to Know

Prices in the auto market for both new and used cars have risen steadily since the onset of the pandemic. Understanding the dynamics of this market can provide valuable insights for prospective buyers. This article investigates the trends in sales, inventory challenges, and essential tips for navigating your next car purchase.

Current Market Overview

After years of shortages and soaring prices, the auto market is gradually returning to normal. Although inventories of new vehicles for sale are still below pre-pandemic averages, availability is improving significantly. Consequently, car shoppers are finding a broader selection and more reasonable deals.

Sales Projections

New car sales are projected to reach 15.5 million this year, a notable increase from 13.8 million in 2022, marking the highest figures since the COVID-19 pandemic. However, this figure still falls short by 9% compared to 2019’s 17 million. Strong demand persists, even amidst a 20% increase in prices compared to pre-pandemic levels for similar vehicle models.

Impact of Rising Interest Rates

Despite rising interest rates, which have climbed from around 4.5% to 7% or more for buyers with good credit, sales are on the rise. The average monthly payment for a new car loan currently stands at $725, a reflection of the increasing costs of vehicle ownership. Consequently, many older vehicles are now in need of replacement, further fueling demand.

Fleet Sales and Recovery

Fleet operators are also re-entering the market. Sales to rental agencies and other commercial buyers now comprise 18% of total sales, as rental agencies look to replenish their fleets that were reduced during the pandemic.

Buying Tips for Car Shoppers

If you are in the market for a vehicle, there are several factors to consider:

• Negotiate Wisely: You possess more leeway to negotiate than before. However, attractive financing, price breaks, or favorable trade-ins can vary significantly by dealership.
• What You Need vs. What You Want: Opting for models that lack the latest features might lead to a better price. Dealers may show more inclination to move these vehicles off the lot.
• Consider Multiple Brands: Being open to various brands can help, as some manufacturers like Toyota, Honda, and Subaru are still experiencing inventory shortages.

Financing Options

While financing deals may seem appealing, it’s crucial to read the fine print. Low-interest offers typically require short-term loans, which can lead to higher monthly payments. In some cases, slightly higher rates on longer-term loans might be available, so it’s advisable to inquire.

Trending Vehicle Segments

The most sought-after segments currently include compact and medium-sized trucks. Don’t expect any discounts in pricing for these popular models. For instance, Ford’s Maverick small pickup is sold out for the 2023 model year, demonstrating its high demand.

Used Vehicle Market Insights

For those considering used vehicles, prices are expected to remain elevated for the foreseeable future. The inventory crunch during the pandemic significantly increased prices, and it will take time for sufficient new cars to enter the used market.

In conclusion, as the auto market continues to navigate challenges and recover from the pandemic, understanding these trends and tips will empower buyers to make informed decisions. Stay ahead by keeping these insights in mind during your car-shopping journey.