US auto prices remained on high alert in late 2022, with the average vehicle transaction price increasing 6.3% year over year from September 2021 to September 2022.
The good news is that prices will drop this fall.
The average retail deal price of new cars in September is expected to be $45,622, up 6.3% from September 2021, according to JD Power. The company stated that “the previous highest level for any month – $46,173 – was set for July 2022.”
However, new and used car prices in the United States are still accelerating, mostly due to troubling global economic problems.
“Car prices are rising due to global supply chain issues,” JP Morgan noted in a recent research report. Meanwhile, a persistent shortage of microchips is hampering production in the auto industry, creating a supply crunch. Higher costs of raw materials also lead to higher car prices, which were exacerbated by the Russian-Ukrainian crisis “
These issues were a big reason Americans paid an average of $45,869 for a new car in July 2022, a record.
“We estimate that half of the increase in new vehicle prices is related to exceeding higher input costs, including raw material costs,” said Ryan Brinkman, principal analyst for automotive equity research, JPMorgan. Our data showed that the weighted average cost of raw materials used to produce a new vehicle reached an all-time high in 2021, rising 116% year over year.
Electric vehicles have been particularly affected by higher material costs, “due to higher prices for key metals including lithium, nickel and cobalt — the primary components of electric vehicle batteries —,” Brinkman noted.
Used cars haven’t escaped high sticker prices either.
“According to the CoPilot car shopping app, US consumers today pay an average of $10,046 more for a used car than if typical consumption expectations were in place,” the JPMorgan report stated. Similarly, data from the US Bureau of Labor Statistics shows that used car prices rose 7.1% year-over-year in June 2022.
Should you buy or wait?
For Americans with a real need to buy a new or used car, the trick is to get a new one at the best possible price — but that option may not be available at the moment.
“It’s hard to predict what will happen in the next six to twelve months, but it appears that the supply of new and used cars will remain restricted, and demand will remain high,” TRED CEO Grant Vick said. “Consequently, it seems unlikely that we will see significantly better deals next year.”
One of the big problems is pent-up demand, as buyers put off buying while they wait for better deals.
“As the auto market and prices are up, more people who have been waiting are going to buy cars because prices are still relatively flat and it seems like the new normal,” Vick told TheStreet.
The decision to buy is not easy at the moment, with many factors influencing the price.
“Any decision to buy now will probably depend on the local market, the vehicle brand, and the sale,” said Cliff Banks, president of TheBanksReport.
Having said that, Banks said he’s leaning toward not buying a new car today.
“I’ve been waiting for stocks to come back,” he told TheStreet. It is a matter of supply and demand. More cars at a lot of dealers will likely result in lower prices. It’s all about guessing now. But things can change quickly as demand appears to be lower today than it was two months ago.”
One option might be to rent a car instead of buying one.
“When you rent a car, your monthly payment is directed toward car depreciation, which is typically 50% of the car over three years,” said Gunther VW Delray Director of Marketing and Sales Giovanni Velez. “As long as the return amount is 50% of the purchase price, the rental payment should not be affected.”
If leasing isn’t an option and the car buying process is on, know where you stand before you visit an online car dealer or seller.
“The best way to get a deal from a car dealership right now is to know your car’s trade-in value, the down payment you plan to make, your monthly budget, and then stick to your plan,” Velez told TheStreet. “When you follow your plan, you’ll get a great deal on a new car that you’ll love.”
It is also important to know what is happening in your local market.
“Compare prices at different dealerships,” Banks told TheStreet. Big List Sites – Cars.com (cars) and Autotrader.com (KBB.com) and TrueCar.com – they will give you a quick glimpse of the cars being sold in your market. That will give you an idea of what you’re working on.”
Plus, check out CarMax (KMX) Carvana (CVNA) and KBB and Vroom (VRM) To find out what they offer for specific used vehicles, she advised banks.
“Find a used car you want to buy, then see what these companies offer for similar vehicles,” he said.