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One of the best weekends for pre-pandemic car shopping is rather dumb these days.
Against the backdrop of production challenges for the automotive industry due to ongoing supply chain problems, Memorial Day sales are generally minimal or non-existent this year.
“It looks pretty bleak, to be honest,” said Ivan Drury, senior insight manager for Edmunds. “It’s getting harder and harder for people to get a new car with the features they want, at a price they’re willing to pay.”
The average amount paid for a new car is over $ 45,200, up 18.7% from a year ago, according to a joint forecast by JD Power and LMC Automotive. Buyers pay an average of about $ 700 above the price of the sticker, Drury said.
At the same time, the average incentive offered by dealers has fallen to the lowest ever of 1034 dollars, compared to 2996 dollars a year ago, according to the forecast of JD Power / LMC. Generally speaking, dealers should not offer many incentives to sell cars these days.
In fact, although the sales rate fell 23.8% from a year earlier due to reduced inventories, the average car profit at dealers was $ 5,046 compared to $ 2,733 a year ago.
It is becoming increasingly difficult for people to get a new car with the features they want, at a price they are willing to pay.
Ivan Drury
senior manager of insights at Edmunds
“This increased profit per unit is more than offsetting the decline in sales,” said Thomas King, president of data and analysis at JD Power, in the forecast.
Meanwhile, facing limited inventory for a new vehicle, a growing proportion of buyers are turning to used car lots, Drury said.
“You see a lot of new cars [dealer] “Websites that are labeled ‘soon’ or ‘in transport’ have already been sold,” Drury said. “So unless you can pre-order this vehicle and wait three or six months for it, you’ll end up in a used car. “
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Of auctioneers, 45% end up with a used vehicle, up from 35% a year ago, Drury said.
Of course, there is little relief in the used car market. Average prices have risen by 22.7% in the last 12 months, according to the latest data from the Bureau of Labor Statistics. The average value of transactions is $ 29,948, according to a study by Edmunds.
However, this means that trade values are also higher.
“Take a lot of offers for your own used car,” Drury said. “Use this.”
Another thing to consider is the cost of financing. The average rate paid on new car loans is rising. It reached 4.7% in April, compared to 4.5% in March and 4.1% in December, according to Edmunds. As the Federal Reserve is expected to continue raising the key interest rate, which affects consumer loans, car buyers are likely to face higher interest rates in the coming months.
However, well-qualified buyers may be able to get a decent price, depending on the car.
“You can still get zero or maybe 1.9% funding,” Drury said.
The average rate for used cars is 8%. However, for certified used cars – which are usually rigorously tested and come with an extended warranty – you can find special financing deals.
“It could be 1.9% or 2.9% or even a cash back,” Drury said.
And while these used cars may cost more, you can pay a higher interest rate on a loan for an uncertified version.
“Even if you save money in advance with an uncertified used car, you may end up paying more overall,” Drury said.
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