New and used cars are getting more expensive. What experts say if you need to buy now
The car industry is seeing yet another spike in both new and used car prices as supply and demand remain volatile, experts say.
Used car prices are now 43% — or $10,046 — above their expected “normal” price, according to CoPilot’s Return to Normal Index. Projected prices are calculated using depreciation rates and estimate a car’s value depending on its age.
The average price for a used car was $33,341 as of June 30, according to CoPilot’s data. While prices are still lower than March’s peak, they climbed 0.5% in June.
At the same time, new car prices are at record-breaking highs, too.
In June, the average price of a new car reached $48,043, an all-time high, according to Kelley Blue Book. Prices for new cars are up 12.7% compared to this time last year.
Here’s what to know if you need to buy a car soon.
A supply and demand problem
The car market, new and used, has faced major disruptions since the start of the pandemic.
The ongoing problems come down to supply and demand, according to Pat Ryan, CoPilot co-founder and CEO.
“Despite signs of a slowing economy, rising interest rates and high fuel prices, the used car market is holding firm. In fact, dealers are even raising prices to near record highs,” Ryan said in a news release. “That’s because, despite a year of unprecedented price increases, new car inventory remains historically low, consumer demand remains consistently strong — and dealers see an opportunity to continue their record profitability.”
The supply of new cars was thrown off by disrupted supply chains and a chip shortage. The perfect storm of volatile demand and slowing supply spurred by the COVID-19 pandemic had drastic effects, and, although the market is recovering, it is still a ways away from its pre-pandemic state, according to KBB.
As the supply of new cars has dwindled, demand for used cars has ramped up, giving sellers more power over prices. Used cars, when they are available, are quicker and easier to get than new cars, Barron’s reported.
Between dwindling supplies, spiking demand and ever-increasing prices, buyers are facing a tough car market.
Advice for buyers
The biggest piece of advice experts have for consumers: If you can wait to buy a car, you should.
If you can not wait, however, you should act fast, according to Joseph Yoon, Edmunds’ consumer insights analyst.
“If you find a deal you like, and if you have a dealer you trust, go today,” Yoon said. “You have to go and get the car today. If you can’t get the car today, get your name on the list. Get your name down for an allocation.”
With car supply still low, dealers are struggling to maintain full lots that offer potential buyers choices. In addition to acting fast, Yoon says consumers should adjust their expectations for what their budget can afford.
“If I had $7,000 to buy a car for my 15-year-old, that used to mean something that was five, seven years old,” Yoon said. “But now it’s like 10 to 15 years old because that budget is no longer anything that is matched to reality.”
The ongoing impact of the chip shortage and other supply chain disruptions is here to stay, at least for now, but consumers can shop smart if they are prepared and research what is available within their budgets.
A hopeful outlook
Although prices look bad now, some analysts are hopeful that recent data shows promise for some normalization in the next few months.
Used car prices are actually lower than they were earlier this year, so while they are still higher than “normal,” they are trending in the right direction, according to Brian Moody, Kelley Blue Book and Autotrader’s executive editor.
Moody said consumers could see prices normalize even more in the next six to 12 months, but in the meantime, those who need to buy a car should try to find a lightly used car.
“Month over month used car listing prices are down slightly simply because there are more of them,” Moody said in an interview with McClatchy News.
In June, there were 2.5 million used cars for sale while there were only 1.12 million new cars available, according to data from Cox Automotive. With a greater supply of used cars and lasting demand, prices have the room to fall, even if only by a little bit.
As for the price of new cars, Moody said the data is a little skewed, so it might not be as bad as it seems.
“People that are buying new cars are buying expensive new cars,” he said. “If you’re in a position right now to say, I don’t care about the economy I just want a new car, you’re probably not looking at a base Corolla.”
Editor’s note: This story has been updated to correct the name of an expert.
This story was originally published July 22, 2022 at 4:28 PM with the headline "New and used cars are getting more expensive. What experts say if you need to buy now."
