When it comes to car shopping these days, sticker price can mean sticker shock.
Prices of new and used cars continue to rise amid strong demand and tight inventory. While the manufacturing slowdown has improved slightly, there won’t be a return to normal anytime soon for car buyers.
“The usual dealer experience that consumers know — cruising in lots and lots of rows of cars, negotiating a price and getting many incentives — is not likely to return this year because there are 4.5 [million] It’s about 5 million consumers on the sidelines waiting in cars, said Tyson Gomini, head of data and analytics at J.D. Power.
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“This pent-up demand will keep stocks low and prices high for most of 2022,” Gomini said.
An ongoing global shortage of microchips – key components needed to power cars today – that began in 2020 continues to slow manufacturers’ production of new cars, driving up supply demand.
“It’s a little bit better in the sense that there’s no longer a drop in inventory — it just doesn’t get any worse,” said Evan Drury, senior director of insights for Edmunds.com. “But we’ve been talking for several months now until things start to look normal.”
The average deal price for a new vehicle is now above the manufacturer’s suggested retail price, or MSRP: $45,872 versus $45,209, according to the latest data from Edmunds.
Jomini said an estimated 89% of shoppers pay more than or within 5% of the sticker price.
Part of the reason for recording transaction prices is that automakers have lowered their discounts because, in general, they don’t need to offer big incentives to sell cars right now.
In other words, new cars don’t hold off for long once they reach a dealer: In December, an estimated 57% of cars were sold within 10 days of delivery, according to JD Power. The average time, in general, to sell a new car from a lot is 17 days, a record low and low from 49 days a year ago.
Edmunds data also shows demand also extended to the used-car market, with buyers paying an average of $29,011, up 27.9% from a year ago. That ranges from an average of $141,244 for a 9-year-old car to $30,334 for a 3-year-old car.
One bright spot, Drury said, is that demand for used cars has pushed trade values much higher than usual.
“Shop that trade in,” he said. “Don’t break with old assumptions about mileage or depreciation, because it’s all on the outside.”
And while you should be prepared that there is plenty of wiggle room about the price of the car, you may be able to negotiate the value allotted to your trade-in.
In addition, interest rates are generally low at the moment.
“You can still get cheap,” Drury said, adding that there are still 0% or 0.9% financing deals available, depending on the make and model you’re looking at. Otherwise, the average interest rate for a new car loan is less than 4%, according to Bankrate.
If you have flexibility in the timing of your purchase and can’t find what you want at many dealerships, it may be worth ordering your vehicle.
“While the car may take four to eight weeks to arrive, it will be built to your exact specifications, such as trim and color,” Jomini said. “Now some automakers will offer pre-order incentives that are not available to consumers who buy what’s in stock.”
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