When it comes to buying a car these days, the price of a sticker can mean sticker shock.
New and used car prices continue to skyrocket amid strong demand and stock shortages. While the production slowdown has improved slightly, car buyers won’t be back to normal anytime soon.
“The typical dealership experience that consumers are familiar with – walking through dealerships with rows of cars, negotiating a price and getting a lot of incentives – is unlikely to return this year because there are 4.5 [million] up to 5 million consumers on the sidelines waiting for vehicles, ”said Tyson Jominy, head of data and analytics at JD Power.
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“This pent-up demand will keep inventories low and prices high for much of 2022,” Jominy said.
The ongoing global shortage of microchips – key components needed to power modern automobiles – which began in 2020, continues to slow manufacturers’ production of new cars, pushing demand outstripping supply.
“It’s a little better in the sense that stocks don’t disappear anymore — they don’t get worse,” said Ivan Drury, senior manager of analytics at Edmunds.com. “But we still talk for many months until it looks more normal.”
According to the latest data from Edmunds, the average deal price for a new car is now higher than the manufacturer’s suggested retail price, or MSRP: $ 45,872 versus $ 45,209.
Jominy estimates that 89% of shoppers pay more than, or within 5% of, the quoted price.
Part of the reason for the record deal prices is that automakers have cut their discounts because, generally speaking, they don’t need to offer big incentives to sell cars right now.
In other words, new cars don’t stay long after they arrive at the dealership: According to JD Power, in December, about 57% of cars were sold within 10 days of delivery. The average time to sell a new vehicle from a batch is 17 days, a record low from 49 days last year.
Demand has also spilled over into the used car market, where buyers pay an average of $ 29,011, up 27.9% from a year ago, Edmunds data shows. This ranges from an average of $ 14,124 for a 9 year old car to $ 30,334 for a 3 year old car.
One of the highlights, Drury said, is that the demand for used cars has far exceeded normal value.
“Shop what a trade-in,” he said. “Don’t give up on old assumptions about mileage or depreciation because it’s all outside the door.”
And while you should be prepared for little wiggle room in the price of the car, you can negotiate the value assigned to your exchange.
Plus, interest rates are generally low right now.
“You can still get cheap money,” Drury said, adding that funding deals are still available at 0% or 0.9%, depending on the brand and model you are looking at. Otherwise, the average interest rate for a new car loan is less than 4%, according to Bankrate.
If you have the flexibility to choose when to buy and can’t find what you want in dealer lots, it might be worth ordering your vehicle.
“While it can take four to eight weeks for the vehicle to arrive, it will be built to your exact specifications, such as trim and color,” Jominy said. “And now some automakers will offer pre-order incentives that are not available to consumers buying what is in stock.”