How to Navigate the Current Auto Market
If you’ve been trying to buy a car recently, you may be all too aware of how crazy the car market is. Whether you are looking for a new car or a used car, the wait times, prices, and increasing rates are making it an ordeal for many to get a new set of wheels. But that doesn’t mean it’s impossible to get yourself in a new car.
Here are the best ways to navigate the current auto market.
Why is it hard to buy a car right now?
Demand for cars is at an all time high, while the supply of cars–both new and used–is at a low. This is causing both record prices and increased wait times for customers across the world. So how did we get here?
Increased demand
In the past two years we have seen an increased demand for cars, both new and used. When the pandemic hit, many people saved money by not going on vacations and not spending money on entertainment. These savings combined with subsidy checks meant that people had money to buy things they needed, like a new car.
Not only did people have a bit more money to spend, but interest rates were at an all time low. In an effort to keep the economy going, the Fed reduced interest rates to encourage spending. And this worked, albeit a little too well. All of this combined to create an increased demand for new cars.
Decreased supply
An increase in car demand was unfortunately coupled with a decrease in supply. The supply of new cars decreased for a few reasons:
- Many factories were forced to shut down or limit production numbers due to the pandemic.
- Supply issues with raw materials such as plastics and steel cause production to slow down.
- A shortage of microchips–used in cars for everything from navigation systems to window controls–slowed car production. Some experts think that 90-95% of the new car supply issue can be attributed to chip production.
All of this meant that there were fewer new cars on the market, which affected the used car market as well. Used car demand increased for a few reasons:
- High new car prices drove buyers to less expensive used options.
- Lease drivers returned their leases less frequently so there was a smaller supply of used cars.
Low supply and high demand creates inflation, which makes it more difficult to get a fair price on a car.
High prices
When supply and demand are out of sync, inflation can occur. In 2022 inflation hit a 9.1% year over year increase–the highest it’s been since 1981. Inflation affects all parts of our economy (both in the US and worldwide), and the car market was no exception. In August 2022 new car prices hit an all time high. The average new car had a price tag of $48,301 according to Kelley Blue Book, which was up 11% from August of 2021. While used car prices are starting to normalize a little bit, they are still much higher than they should be.
High interest rates
It’s no secret that inflation is putting a major toll on our economy. That’s why in the beginning of 2022 the Fed began to raise interest rates. By raising interest rates, the Fed was hoping to slow down demand by making borrowing money more expensive. They were also hoping that high interest rates would encourage more saving and allow the economy time to cool off. This is the balance that the Fed is always hoping to strike.
Longer Wait Times
If you are looking to buy a new car, it takes a bit longer these days. All of these supply issues mean that production and shipping are taking more time, so customers are waiting many weeks and months longer than usual.
Should I wait to buy a new car?
There is no cut and dry answer for this, as it depends on your situation. Buying a car isn’t impossible right now, but it will require a bit more patience and research. If you have your heart set on getting a new set of wheels, we have some tips to help you in your quest.
Here are our top tips for buying a new car in 2022.
Be flexible.
The more flexible you can be with your choice of car, the easier this process will be. Certain brands and models are experiencing longer wait times and higher inflation than others, so it is good if you can be a little flexible. It might take longer or be harder to get certain add ons, exterior colors, or features, so being flexible here will help you as well.
Actively track car prices beforehand.
The more research you do, the more confident you will be that you are getting a good deal. Using sites such as Kelley Blue Book and Edmunds will help you to determine how much you should be paying for your new car.
Shop around for rates.
It’s always important to shop for rates, but it is crucial to do so now. Look at different credit unions, online lenders, and traditional banks to get pre approved. This is not the time to get roped into dealer financing, which can be especially pricey. Taking the time to ensure that your credit score is in good shape can also pay off for you.
Come with cash in hand.
When rates increase, it’s more important than ever to pay for as much as possible with cash. A larger down payment will not only help you qualify for a better loan, but it will save you a lot of money in the long run.
Know the value of your old car.
One good thing about this situation is that your used car has never been more valuable. That’s why you should have a good sense of how much money your car is worth before you go to look for a new one. Chances are the dealership will try to lowball you when buying your old car, so you may be better served to sell your car privately.
Those are our top tips for navigating the current auto market.
If the time isn’t right to get a new car, consider refinancing your existing car loan. There's a good chance that you can find a car loan APR that is lower than your current rate. Using a company that specializes in car loan refinance can make this process quick, easy, and effective.
You can get a free quote in just a few minutes, so don’t wait–contact Auto Approve today to get started. With a 96% would-recommend rating on LendingTree and an A+ from the Better Business Bureau, you know you are in good hands.