Thankfully, analysts have continued to see a steady decline in car prices throughout 2022. But that doesn’t mean you should run out and purchase a used car this year. “It’s important to remember that prices are still grossly inflated compared to all normal market conditions,” Pat Ryan, founder and CEO of CoPilot, a car-shopping app told CNBC. According to Ryan – used vehicles are still a whopping 33% more expensive then pre-pandemic.
The chip shortage is expected to ease in 2023 which signals to analysts that cars – both new and used will be a lot cheaper in the new year than they were during the pandemic. But before you rush out on January 1st to purchase a car – experts want you to know these 5 things.
Do Your Research
This shouldn’t come as a surprise – consumers should always do their research whether there’s a chip shortage or not.
Zach Shefska, co-founder and CEO of YAA, an advocacy website for car buyers recommends looking at cars that have been sitting on a lot for more than 60 days. The dealership isn’t making any money when their car sits ideally in their lot – therefore they may offer a more substantial discount to make a sale.
Give the Automotive Industry Time to Replenish Supply
While prices are expected to drop in 2023 – it’s important to give the automotive industry time to replenish their supply – especially when it comes to new cars. Back in September, Honda announced they were cutting production by 40% due to the chip shortage.
Buy New Vs. Used
We are conditioned to believe that paying less for a product indicates we got “more bang for our buck.” But that’s not always the case especially when it comes to purchasing cars in 2023. While consumers will be able to find great deals on used cars next year – they shouldn’t count out new vehicles.
If you are paying 33% more for your car – the new car will give you the ability to drive it for longer and get the exact features you’re looking for. According to a survey from iSeeCar.com – most people drive their new car for roughly 8.4 years before trading it in and purchasing a new vehicle. That number varies depending on the car model itself. Owners tend to keep their Toyota Land Cruiser for 11.4 years while the Ford Expedition is owned for roughly 10 years by their original owners.
Most pre-owned cars are selling significantly higher than pre-pandemic rates –and most don’t last as long as new cars. In addition, you won’t be protected by the car’s warranty.
Put More Money Down
Whether you have good credit or not – interest rates are rising – which means you may get a good deal on your car - but the interest rate of your car loan may negate any savings. If you can – pay for your used car in cash. If that’s not an option – speak to your bank or a local credit union to see if they can offer you any low interest loans saving you money in the long run.
Weigh the Pros and Cons
If your car is in good shape – it may not hurt to keep it for a little while longer. Chances are your car loan is almost paid off – if it’s not already. If your car isn’t giving you any expensive issues – see if you can hold to it for a little while longer.
On the other hand, if you see your mechanic more than you see some of your friends – chances are you’re paying more to fix your car than it’s worth. If that’s the case – purchasing a car in 2023 may not be a bad option for you. While you may be paying a larger monthly payment each month – you are saving more money in the long run since it won’t be constantly breaking down.