If you've recently been in the market for a new car, you might've noticed that car prices weren't what they used to be. Starting around the end of 2020, the used car market began to see some price changes. No one knew what would happen with the COVID-19 pandemic and many automotive suppliers, businesses, and even shoppers weren't sure about what to do. In the beginning, we saw used car prices drop and as of recently, car prices have been at an all-time high.
But, is the car market a bubble? According to J.P. Morgan, used car prices peaked at the end of 2022 and can be expected to come down up to 20% throughout 2023. Personally, I think what goes up, must come down and I think the car market is certainly a bubble. In fact, we're already seeing car prices begin to drop now. With that being said, I don't think car prices will ever be as low as they were pre-pandemic.
Why Did Car Prices Go Up?
So, why did car prices go up? There were many factors that contributed to rising car prices. The COVID-19 pandemic came with uncertainty for both buyers and shoppers and as a result, car prices dropped. However, as businesses started opening up and stimulus checks were distributed, buyers became more confident and started their vehicle search. With an increase in demand and inventory shortages from supply chain issues, car prices started to increase.
New Cars: New cars were being sold for over MSRP because of supply chain shortages. Suppliers shut down during the pandemic and passed production on new vehicles. When production finally started back up, it was too late and shoppers were finding themselves waiting several months for a new vehicle so ones sitting at the lot demanded high prices.
Used Cars: As new vehicles were getting harder to purchase, buyers turned to used cars. Demand for used cars increased and with used car owners holding onto their vehicles until new cars became more available, the inventory for used cars started to get smaller and smaller.
When Should You Buy a Car?
I'm a firm believer that you should buy a car if you need it and it fits your budget. While many experts are anticipating car prices to drop throughout 2023, it could be well into 2024 before you notice the price decreases. If there's a car available that you've always wanted and your finances allow it, then it might be wise to simply purchase the car and do your best to negotiate the price down.
Negotiating is something I'll touch on at a different time but there's no doubt that you have some buying power as the market begins to even out. Remember though, one of the reasons car prices are decreasing now is because of high-interest rates. As shoppers begin purchasing vehicles again, we could very well see an increase in interest rates once again. I don't think car prices will ever get as low as they were before the pandemic so if you can wait, wait it out but buy now if the price is right.
Do Your Research
At the end of the day, no one really knows what's going on with the market. The best time to buy a new car is when you're armed and ready. Do your research on the market and see what the average price is for the car you're interested in. Know that you can always walk away if something doesn't feel right and don't overspend. If you need help with your vehicle search, feel free to reach out to me for some advice!