The market for new and used cars has been difficult over the last two years. Pandemic-induced supply chain issues emptied dealership lots and pushed prices through the roof. It looks like the situation could be turning back in favor of the consumer. Here are the reasons now is finally the time to buy in this week’s Five for Friday.
#5: Electric vehicle price wars
In January, Tesla cut the price of some of its flagship cars by as much as 20% in a single day. A few weeks later, Ford made a similar move, dropping the price of its Mustang Mach-E. This will make some models eligible for the U.S. government’s $7,500 EV tax credit. It also opens the door for the great EV price wars that will likely bring down prices industrywide, not to mention make it more affordable to get into a used model too.
#4. Falling used car prices
Used car prices “likely peaked” in 2022, according to JPMorgan. The steady supply of new vehicles and waning demand can only push prices down even further. After jumping more than 37% in 2021, used car prices finally fell 8.8% last year. JPMorgan sees used cars losing another 10% to 20% in 2023. But today’s average price of $27,143 is still considerably higher than the $17,500 average in July 2019.
#3. Struggling industry giants
Carvana and CarMax have been feeling the pain of falling used car prices. Stock prices for the used car giants were wiped out over the last 12 months and the weak demand isn’t helping. This could mean good news for anyone in the market for a used vehicle as the companies are forced to sell inventory for less than they paid. Maybe Carvana shouldn’t have been paying more for 7-year-old cars than they were worth brand new.
#2. Tax refund season
In the coming weeks and months Americans will have their tax refund checks burning a hole in their pockets and dealers know it. If you are planning to buy, act fast because the first few months of the year could see a slight rise in price due to those checks coming in. But dealers will no doubt offer some incentives to get you in the door so they can offload some of last year’s leftover inventory. Twitter-famous CarDealershipGuy says there’s a big dip coming after that, so there’s plenty of opportunity to buy this year.
#1. You can pay under sticker again
Part of buying a new car is the thrill of negotiation, and it’s finally back. Buyers had less sway at the dealership during the surge. In fact, in January 2022, 80% of buyers were paying over sticker price for new cars. But by the end of 2022, buyers were paying $300 less than MSRP on average. It’s still not nearly as good as the $2,600 under sticker buyers were able to get in 2019.
