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- Car shoppers today are thinking about the economy and inflated rates.
- It's hard to know whether now is a good time to make a major purchase.
- Buyers have to choose between inventory and interest rates.
If you're shopping for a car right now, you probably have a lot on your mind, like concerns about interest rates, questions about inventory, and uncertainty about the economy.
All of that might mean you're wondering whether now is the right time to make a major purchase. If you're going to spend around $48,763 on a new car (per Kelley Blue Book), or $29,226 for a used one (per J.D. Power), it's normal to wonder if you're acting prematurely or if better deals will soon be on the horizon. Unfortunately, the answer isn't a simple yes or no; instead, it depends.
Things are shifting, and in part, for the better. In fact, the auto market is actually the best it has been in three years, if you want more vehicle availability or if you don't want to pay sky-high prices, at least for a new ride.
But if you're worried about interest rates, you could try to hold off.
It's hard to predict exactly what the car-buying market will be like in the coming months. After all, no one could predict the impact that the pandemic would have on the auto industry. It sent the prices of new and used vehicles soaring. It kept inventory on dealer lots low. It meant shoppers had to settle for less than what they wanted in terms of certain features.
Ultimately, each buyer has to decide what's more important — choice or the cost of interest — and that will influence if now's a good time for them to buy.
"Often, people are asking me, is this a good time to buy a car or should I wait? Most times I say, don't wait, because we don't know what tomorrow's going to bring," Scott Kunes, COO of Kunes Auto and RV Group, which owns more than 40 dealerships in the Midwest, told Insider. "I do think that even though right now may not feel like the best time to buy a vehicle, it probably still is."
What makes it a good idea to buy a car right now?
It's hard to give consumers a definitive answer as to whether the car-buying market will get any better. You have to be able to define "better." It's not unlike the housing market; if prices are lower, perhaps inventory won't be as plentiful. But if there is substantially less inventory, prices shoot back up — and you might end up having to settle for something you're not that keen on.
Car-buying experts have been weighing similar pros and cons in the auto retail market for months as all sorts of dynamics shift.
"Inventory is definitely up," Whitney Yates-Woods, dealer principal of Yates Buick GMC in Goodyear, Arizona, said. "I think that the power is shifting to the buyer again, where they can get deals on new vehicles. The over-MSRP days are gone, so that's nice for buyers."
Certain brands have more availability and pricing flexibility than they've had in the past three years. Incentives are creeping back to levels not seen since the pandemic. And dealers have more reason than they did throughout COVID to negotiate with buyers because they aren't used to cars sitting on their lots (and want to get back to the pandemic-era margins they saw).
"After COVID, there was such a shortage of inventory, you saw cars selling within 20 to 30 days of them showing up," George Chamoun, CEO of ACV, a digital auto marketplace, said. "Now you're starting to see that creep up to over 40. Dealers are paying more attention to that."
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What makes it a bad idea to buy right now?
Just because the car-buying market is better now than it has been, that doesn't mean it won't continue to get better in other ways.
But just because it could get better, that doesn't make now a bad time to buy.
Incentives have been so historically low that some could argue they can only go back up. Holding off on a used purchase might mean a buyer taps into some of the biggest used vehicle price drops moving forward.
On the other hand, interest rates might also keep climbing. Your trade-in value might only get lower. And new vehicle buying could somewhat normalize, but used vehicles will remain tricky as a result of leasing being down and people holding onto their vehicles longer than ever. Used prices are expected to go back up again, creating a short window of opportunity.
Car-buying probably won't get exponentially better ever again, so if you really need something, why wait?
It's important to remember that car buying is probably never going back to "normal."
If a car shopper is waiting for the day of perfect interest rates, bountiful inventory, and great incentives, it's not likely all three will align, at least anytime soon. The car-buying market is forever changed.
As for interest rates: It's hard to say what will happen in the long run.
As for inventory: Automakers are sacrificing market share and prioritizing profits, so they've made it clear new inventory will never fully revert to what it used to be. Besides, if it's not the chip shortage, some other supply chain disruption will be a factor, especially as more EVs come into play. You're not likely to find an influx of starter cars again.
As for incentives: Those will fluctuate — and just like it took years after the recession for these deals to recover, it'll take years for them to bounce back to "normal" (if they ever do) this time.
"The good news is we're off the market highs, so at least they aren't buying 'at the top' of the latest cycle," Karl Brauer, executive editor of iSeeCars.com, said of buyers. "The real question is how much lower will prices go in the near term?"
It seems inevitable that prices will drop, but Brauer said they may not drop as far or as fast as the macroeconomic factors might suggest.
"Do your research," Brauer said. "The overall market remains high but certain models in some markets are actually down in price far more than the overall average. Use the online tools we can all access to identify those deals, and buy with as much cash as you can safely afford to avoid today's higher rates. A cash buyer ready to undertake sufficient due diligence can certainly get a solid deal in today's car market."