Is Now the Time to Buy, Sell, or Trade-In a Car?

The car buying and selling marketplace is constantly evolving, influenced by various factors such as supply and demand, credit conditions, and economic trends. As a potential car buyer or seller, it’s crucial to stay informed about the current market conditions to make the best decisions. In this article, we will provide you with an overview of the current situation in the car market, discuss what new and used car shoppers can expect, explore the impact of higher interest rates, and offer tips for buying, selling, and trading in a car right now.

What New Car Shoppers Can Expect

The average sale price of new cars rose slightly last month, but this is not indicative of a new trend. In fact, new car prices have been on a steady decline for some time. The recent increase can be attributed to two main factors: the United Auto Workers (UAW) strike and Tesla’s pricing strategy.

During the UAW strike, Detroit’s Big Three automakers slightly reduced incentives, leading to a temporary increase in prices. However, the strike did not cause a major shortage that would drive prices up significantly. Additionally, Tesla, as a major player in the electric vehicle market, raised prices after offering significant discounts throughout the year.

With the UAW strike likely over and Tesla unlikely to raise prices again in the near future, experts expect the average sale price of new cars to resume its slow descent. This means that car shoppers can expect more affordable prices and potentially good deals on new cars this month.

What Used Car Shoppers Can Expect

The used car market has experienced some interesting dynamics recently. Despite a thin supply, prices have been falling. In October, the average used car sold for a lower price compared to September and the same period last year.

The prices dealers pay for used cars at auction have also fallen, which usually translates into lower retail prices after a few weeks. While prices are favorable for buyers, the selection of used cars remains limited. The overall inventory volume of used vehicles has been stuck in a range for the past four months, indicating a 47-day supply of cars available for sale. This is below the industry’s rule of thumb of maintaining a 60-day supply.

Moreover, dealerships from certain brands have deeper supplies of used vehicles compared to others. For example, Honda, Mazda, and Toyota have the lowest inventory of used vehicles among non-luxury brands. This means that buyers may have a harder time finding a used car that meets their needs, especially in the lower price range.

Lower Supply of Cars Likely Here for Good

A worldwide shortage of microchips, which affected the car market for the past two years, has now come to an end. However, some automakers and dealer groups plan to keep the supply of cars low in order to charge higher prices. This means that the days of dealer stockpiles and hefty discounts may never fully return.

In recent years, the number of new cars purchased by Americans has decreased. In 2021, the number of new car purchases was just over 15 million, compared to the pre-pandemic average of 16-17 million. This trend is expected to continue, with Cox Automotive predicting that Americans will buy 15 million new cars in 2023.

Additionally, automakers are focusing their efforts on building more expensive cars. The era of inexpensive cars is disappearing, with sales of cars priced at $25,000 or less falling by 78% in the past five years. Automakers now offer fewer models in the lower price range and more models in the higher price range. This trend is driven by the Federal Reserve’s interest rate hikes, which have made it more difficult for less affluent consumers to enter the new-vehicle market.

Impact of Higher Interest Rates

While the Federal Reserve has kept interest rates high, lenders have been increasing auto loan rates. Since July, auto loan rates have risen by about 50 basis points. As a result, car loans are becoming more expensive, even though they are relatively easier to obtain compared to previous months.

Higher interest rates may deter some car buyers from purchasing new or used vehicles, as the cost of financing becomes more burdensome. However, the Federal Reserve has not indicated any plans to raise interest rates further at this time. It’s important for potential car buyers to consider their own financial situation and assess whether the higher interest rates align with their budget.

How to Buy a Car Right Now

If you’re in the market for a new car, there are a few things you should keep in mind to make an informed purchase. Despite the slight increase in average sale prices, new cars continue to become more affordable as a proportion of Americans’ income. Additionally, the quality and durability of new cars have improved, making them a worthwhile investment in the long run.

To leverage incentives and get the best deal on a new car, it’s essential to stay updated on the latest offers. Incentives, such as cash back and lower interest rates, can significantly reduce the final sale price. Researching monthly best car deals and comparing offers from different dealerships can help you secure a favorable price.

Selling a Car Right Now

If you’re considering selling your car, now may be a favorable time to do so. Used car prices have been falling, but the ongoing shortage of used cars means that sellers can still expect respectable offers. To get the most money for your used car, you have two main options: selling it privately or selling it to a dealership.

Selling your car privately can be more time-consuming but generally yields higher returns. Platforms like Kelley Blue Book’s Private Seller Exchange marketplace can help you connect with potential buyers and earn more for your car. However, if you prefer a hassle-free process, selling your car to a dealership is a viable option. It’s important to research the value of your car using Kelley Blue Book or similar tools and compare offers from multiple dealerships to ensure you’re getting a fair price.

Trading in a Car Right Now

If you’re planning to trade in your car for a new purchase, you’re likely to receive a respectable offer despite the falling used car prices. While the overall supply of used cars is limited, the ongoing shortage means that dealerships are still interested in acquiring pre-owned vehicles. By shopping around and comparing offers from different dealerships, you can maximize the value of your trade-in.

Keep in mind that the demand for different types of cars may vary. Lower-priced used vehicles are harder to find, with dealerships having a shorter supply. In contrast, dealerships may have a deeper inventory of used vehicles in the higher price range. Researching the market and understanding the supply and demand dynamics for your specific type of car can help you make an informed decision.

Looking Ahead

The future of car prices is uncertain due to potential factors like government shutdowns and lingering effects of the UAW strike. However, there is some positive news regarding easing inflation, which could potentially lead to lower interest rates in the near future. Monitoring these developments and staying informed about the market conditions can help you navigate the car buying and selling process more effectively.

Tips for Buying a Vehicle Right Now

If you’re planning to buy a car in the current market, here are some tips to help you make the right choice:

  • Expand your search: Consider widening your search to a broader geographic area to increase your chances of finding the right car.
  • Stay patient: Contact dealerships early and frequently to inquire about incoming inventory. Leaving a refundable deposit may give you priority access to desirable vehicles.
  • Consider a less expensive model: With higher interest rates, it might be prudent to explore cheaper vehicle models that still meet your needs.
  • Understand the timing: Be prepared to spend several weeks searching for the right car. Contact multiple dealerships to find the best fit.
  • Shop around for trade-in offers: Don’t settle for the first offer you receive for your trade-in. Research your vehicle’s value and contact several dealerships to get a fair appraisal.
  • Explore financing options: Look for the best interest rates from banks or credit unions and consider financing incentives and deals offered by dealerships.
  • Beware of dealer markups: If you notice a markup on your final invoice, ask for it to be removed or consider shopping at a different dealership.
  • Question add-ons: Review your sales summary carefully and question any add-ons or extras that you didn’t request.

Conclusion

In conclusion, the current car market offers both challenges and opportunities for buyers and sellers. New car prices may have experienced a slight increase, but the overall trend remains one of decline. Used car prices have been falling, but the limited supply makes it challenging to find the right vehicle. Despite higher interest rates, there are still options for financing your purchase. By staying informed, researching the market, and considering the tips provided, you can make informed decisions when buying, selling, or trading in a car in the current market.

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