- Car buyers today are thinking about the economy and inflated rates.
- It’s hard to know if now is the right time to make a big purchase.
- Buyers must choose between inventory and interest rates.
If you’re shopping for a car right now, you probably have a lot on your mind, including interest rate concerns, questions about inventory, and uncertainty about the economy.
All of this may mean you’re wondering if now is the right time to make a big purchase. If you’re about to spend about $48,763 on a new car (per Kelley Blue Book) or $29,226 for a used one (per JD Power), it’s natural to wonder if you’re acting prematurely or if better deals will soon be on the horizon. Unfortunately, the answer is not a simple yes or no. Instead, it depends.
Things are changing, and partly for the better. In fact, the car market is actually the best it’s been in three years if you want more vehicle availability or if you don’t want to pay high prices, at least for a new ride.
But if you’re worried about interest rates, you could try holding on.
It is difficult to predict exactly what the car buying market will be like in the coming months. After all, no one could have predicted the impact the pandemic would have on the automotive industry. It sent new and used vehicle prices soaring. Kept stock on dealer lots low. This meant that buyers had to settle for less than what they wanted in terms of certain features.
Ultimately, each buyer must decide what is more important – the option or the cost of interest – and that will affect whether now is the right time to buy.
“Often, people ask me, is this a good time to buy a car or should I wait? Most of the time I say, don’t wait, because we don’t know what tomorrow will bring,” Scott Kunes, COO of Kunes Auto and RV Group, which owns more than 40 dealerships in the Midwest, told Insider. “I believe that even though right now may not feel like the best time to buy a vehicle, it probably still is.”
What makes it a good idea to buy a car right now?
It is difficult to give consumers a definitive answer as to whether the car buying market will improve. You must be able to define “best”. It’s no different than buying a home. if the prices are lower, perhaps the stock is not as plentiful. But if there’s significantly less inventory, prices go up—and you might end up settling for something you’re not that interested in.
Auto market experts have been weighing similar pros and cons in the auto retail market for months as all kinds of dynamics shift.
“Inventory has definitely increased,” said Whitney Yates-Woods, dealer at Yates Buick GMC in Goodyear, Arizona. “I think the power is shifting back to the buyer, where they can get deals on new vehicles. The days of beyond MSRP are gone, so that’s nice for buyers.”
Some brands have more availability and pricing flexibility than they have had in the last three years. Motivation is coming back, also more than it was before the pandemic. And dealers have more reason than they had throughout COVID to deal with buyers because they’re not used to cars sitting on their lots (and want to get back to the pandemic-era margins they saw).
“After COVID, there was such a lack of inventory, you saw cars selling within 20 to 30 days of showing up,” said George Chamoun, CEO of ACV, a digital auto marketplace. “Now you’re starting to see that creep up and over 40. Traders are paying more attention to that.”
What is a bad idea to buy right now?
Just because the car buying market is better now than it was, that doesn’t mean it won’t continue to improve in other ways.
But just because it could be improved, that doesn’t make right now a bad time to buy.
Incentives have been so historically low that some might argue they can only go back up. Pulling off a used car purchase can mean the buyer will be tapping into some of the biggest used vehicle price reductions going forward.
On the other hand, interest rates may also continue to rise. Your trading value can only go down. And the new vehicle market could normalize somewhat, but used vehicles will remain difficult due to leasing not working and people holding onto their vehicles longer than ever. Used prices are expected to rise again, creating a short window of opportunity.
Buying a car probably won’t get exponentially better again, so if you really need something, why wait?
It’s important to remember that buying a car will likely never go back to “normal.”
If a car buyer is waiting for the day of perfect interest rates, rich inventory and great incentives, it’s not likely that all three will align, at least not anytime soon. The car buying market has changed forever.
As for interest rates: It’s hard to say what will happen in the long run.
Regarding inventory: Automakers are sacrificing market share and prioritizing profits, so they’ve made it clear that new inventory will never fully recover to what it was. Additionally, if it’s not the lack of chips, some other supply chain disruption will be a factor, especially as more EVs come into play. You’re not likely to find an influx of starter cars again.
As for incentives: Those will fluctuate – and just as it took years after the recession for those deals to recover, it will take years for them to get back to “normal” (if they ever do) this time around.
“The good news is that we’re off the market highs, so at least they’re not buying at the ‘top’ of the last cycle,” Karl Brauer, executive editor of iSeeCars.com, said of buyers. “The real question is how much lower will prices go in the short term?”
It seems inevitable that prices will fall, but Brauer said they may not fall as much or as quickly as macroeconomic factors suggest.
“Do your research,” Brower said. “The overall market remains high, but some models in some markets are actually priced lower than the overall average. Use the online tools we all have access to to find these deals and buy with as much cash as you can safely avoid The today’s higher interest rates. A cash buyer prepared to do adequate due diligence can certainly score a solid deal in today’s car market.”