generic High demand and low supply are driving car prices to record highs — try these 7 strategies to save on your next vehicle
If you haven’t shopped for a car lately, be warned: Prices for new vehicles have surged to record highs.
According to data from the Kelley Blue Book (KBB), new-vehicle buyers are in an "over sticker" market. Consumers have been paying well above MSRP every month this year.
Low inventory and high demand have also driven consumer incentives from dealers to drop to a record low in June.
If you’re looking to replace your 20-year-old clunker, your lease is up or you’re just ready to upgrade your ride, try the following strategies to lease or buy at a price you can afford.
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Low inventory and booming demand
The average price of new vehicles increased to $48,043 in June, according to a KBB report, breaking the previous record set in December 2021.
That’s a 12.7% increase from a year earlier.
In this economic climate, buit can be harder for buyers to haggle down prices. In fact, they’re paying an estimated average of $1000 over the manufacturer’s recommended retail price, the report shows.
There is some good news for buyers coming out of the compact and compact- SUV sectors though, according to Rebecca Rydzewski, research manager of economic and industry insights for Cox Automotive .
"These segments are selling for more than 30% less than the industry average transaction price."
Used cars could provide a reprieve for buyers
Used car prices are on the way down as inventory is starting to recover with the country’s average days’ supply sitting at 27% what it was a year ago.
Chris Frey, senior industry insights manager for KBB parent company Cox Automotive, says the used car sector is rebounding “just fine”.
“While the used market has been a bit softer than usual this year, it is not experiencing stress. In fact, the market is moving toward pre-COVID 2019 conditions.”
Why has car buying become so hard?
Supply issues continue to be an issue for the automotive industry.
Car dealers measure their stock of cars in days of inventory or how long it would take for them to run out of cars if they couldn’t acquire more. Dealers of new vehicles were sitting at around 35 days’ supply in June.
Used car dealers ended June with roughly a month’s supply of cars priced under $10,000. For comparison, used cars priced at above $35,000 have about double the average supply of cars priced under $10,000.
Retailer incentives for new cars dropped to a record low level in June, which could also cause some to delay their purchases in hopes of snagging a better deal.
7 strategies for buying or leasing
The days of stepping onto a car lot and having your pick of make, model and color are over — for the moment, at least. And discounts? You can forget about them.
Industry experts say new-car inventory is expected to remain tight through at least the first half of 2022. But consumer car site Edmunds and other auto groups say there are strategies to cope:
Consider a used car. Even though used vehicles are also more expensive these days, you may luck into a good deal — or at least one you can live with — if you expand your search.
Be prepared. Know what you’re walking into so you don’t run screaming when you see the sticker price. And look at what other cars are selling for in your area so you have an idea of what you’ll be paying.
Shop outside your neighborhood. If you live in a city with a higher cost of living or your local dealership has a limited selection of cars, see what’s for sale in a nearby town or county.
Be flexible. Don’t head into the process with one car make or model in mind. Have backup brands in case you don’t find what you want.
Start, continue or buy out your lease. If you’ve been leasing and your contract is up this year, consider buying out or extending the lease. If you’re looking for a car, leasing may offer cheaper monthly payments. “And since a lease is a much shorter commitment than a purchase, you can explore makes or models that you might not have considered previously," says Edmunds’ Ivan Drury, senior manager of insights.
Be patient. Nearly half of car shoppers are delaying their purchase, according to Kelley Blue Book research. While no one can say exactly when supply and demand will come back into balance, if you can wait to buy a car, it might serve you well in the long run should the market cool off.
Use your trade in to help offset the high prices. Leverage the rising value of your existing car to trade up into a new one.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
