Whether you are in the market for a new or used car, you will want to keep an eye on the price trends over the next few years. There are several key factors that will play a role in how your car will be priced. Among these are the wholesale price of vehicles and inflation. By the time the 2023 model year rolls around, expect to see prices drop between 2.5% to 5% for new cars, and between 10% to 20% for used vehicles.
Prices will fall by 2.5% to 5% for new cars
If you’re a car shopper, you’ve probably heard of the rumored price drop for new cars in 2023. There are several factors that can affect car prices, but if you’re lucky, you might be able to find a good deal as early as 2022.
However, experts cannot predict the exact date when prices will go down. For one thing, the supply of new cars will be limited due to ongoing supply chain interruptions. Another factor is higher raw material costs. These prices have led to higher input costs, which have put a ceiling on the new car price.
In addition, higher interest rates and energy prices are making auto loans and leases more expensive, and consumers may face difficulty financing a vehicle. Despite these challenges, many experts expect the market to bounce back in 2023.
Prices will decline by 10% to 20% for used cars
Used car prices are projected to fall between 10% and 20% in 2023, according to JP Morgan Research. Prices have already been ebbing since the middle of the year, and they’re likely to keep dropping into the new year.
High new vehicle prices drove many shoppers to the used market. But the recent declines in prices may bring some relief to the average consumer.
The new car supply chain has hit a roadblock due to parts shortages and production issues. New car inventory has dropped to its lowest point since 2011. This has left new vehicle sales on the wane and boosted used-car demand.
While new vehicle prices are still inflated, they’re expected to drop a little in the next few years. In fact, some automakers have hinted that they may cut back on production in order to recoup costs.
Wholesale prices haven’t yet translated into lower sticker prices at dealerships
While the wholesale price of used vehicles is on the upswing, the sticker price is still a no-brainer. In addition to the expected sticker shock, dealers are also facing stiff competition from online used vehicle vendors. Combined with the rising cost of fuel and interest rates, many consumers may be tempted to shop elsewhere.
The Consumer Price Index (CPI) for used vehicles was up slightly in October from September, but this doesn’t mean the car buying experience is improving. A number of factors have contributed to the increase in price, such as high demand, higher input costs and increased competition.
One of the more interesting developments is that new vehicle inventories actually rose by more than 200,000 units in the same month. This is the first time in over a decade that we’ve seen such an increase in the numbers. Despite the brisk competition, some manufacturers have managed to maintain record gross profits. Several automakers have also been able to reduce their incentive programs to a bare minimum.
Pre-pandemic levels likely never return
The price of a new vehicle has been in decline for several years, but the used car market has been far more volatile. According to Adesa, the average price of all vehicles wholesaled in October was $15,254 — a 12.3% drop from its peak in May.
The best part is that the price of a new car is still not likely to increase in the near future. As the economy continues to sputter, it is more likely that the automotive industry will see a soft landing in the coming year.
As for the price of a used vehicle, it is still well below its historical average. Despite improvements in inventory levels, this will continue to be a problem for automakers. Nonetheless, the best news is that shoppers will be rewarded with a higher supply of vehicles to choose from in 2023.
Inflation bubbling up in the new vehicle supply chain
The Consumer Price Index is showing a 12.6% price increase for new vehicles. This is the fourth highest year-over-year price rise in history. It has driven many consumers out of the market for new cars.
Automakers are facing a supply chain crisis. They are unable to produce enough vehicles to meet demand. And there isn’t much they can do to change their production plans.
As a result, the number of used cars is growing. Used vehicle prices are also rising. In September 2022, the average price for a used vehicle was $45,622 – a $3,462 increase compared to the same time last year.
There are two main reasons for the surge in car prices. One is higher input costs. Another is a chip shortage.