Car buyers have been facing high prices in the used car market for more than a year, partly due to high demand and low inventory. However, there is some good news for car shoppers in the second half of the year. As the demand stabilizes and the inventory improves, prices are expected to ease, and consumers can expect to see a reduction of up to 10% in used car prices, according to Joseph Gunther IV at Gunther VW Fort Lauderdale.
The average price for used cars in America during April was $33,582.00, but Mr Gunther predicts that this price will drop to around $30,223.80 later this year, providing buyers with savings of up to $3,358.20. Mr Gunther adds that the supply of vehicles on dealer lots is expected to increase as inventory increases, which is good news for car buyers.
New car prices, on the other hand, are still historically high, with the average transaction price reaching a record-breaking $48,861. However, it was the first time since July 2021 that the average paid price fell below the average manufacturer’s suggested retail price (MSRP), indicating that some buyers can negotiate a lower price for vehicles.
However, rising interest rates could offset the decline in vehicle prices, which means that those who finance their cars may not see much relief. In December, the average interest rate on used car loans was 12.37%, up from less than 10% a year before.
The increase in new car prices is due to the rising cost of raw materials and the shortage of computer chips used to control a vehicle’s gas pedal, transmission, and touch screen. This has led to an increased demand for less expensive used vehicles.
The ultimate determining factor for how much prices will decline will depend on factors such as the war in Ukraine, which has exacerbated supply chain interruptions, and the chip shortage.
If you’re looking to buy a used car, traditionally January, February, and December are the best months to do so, with January being the most popular. “There is more inventory at this time because it aligns with the most popular time to buy a new car due to dealers wanting to get rid of outgoing model year vehicles to make room for new model year inventory,” says Mr Gunther.
However, if you need a car now, “you don’t necessarily have to wait for prices to drop as many dealerships are already starting to offer incentives“. Mr Gunther advises that should buyers want a car now, they should get one: “there is now room for lots of negotiation in dealerships across the country.”
The full breakdown across American can be viewed here.