After Years of Increases, Used and New Car Prices Finally Dip

In the United States, price hikes for automobiles and trucks have been moderating and in some cases even declining, which is helping to reduce overall inflation and giving disgruntled Americans greater optimism that they will be able to find an inexpensive vehicle for almost three years.

A large increase in the quantity of cars on dealer lots following years of acute shortages is the reason for the price slowdown. The supply of automobiles has increased, relieving the pressure that had caused prices to skyrocket.

According to Cox Automotive, 2.61 million new automobiles, trucks, and SUVs were on the lots of American dealers at the end of January. The supply was only 1.74 million a year earlier, in comparison.

Despite the fact that new automobile stocks are still far below the approximately 4 million level that existed before to the pandemic, experts and dealers believe that 2024 will be the most reasonably priced year of the previous five to purchase a new car or truck due to increased availability.

A global scarcity of computer chips, which are essential to the construction of automobiles, was the primary reason of the price hikes that followed the 2020 pandemic. This shortfall led companies to reduce output. Prices shot up as the number of vehicles available decreased.

Some retailers have almost no new automobiles in stock by 2021. Instead, a lot of disgruntled purchasers went to the secondhand market. Due to the ensuing spike in demand for secondhand automobiles, their prices also increased, forcing many individuals out of the automotive market completely.

However, since computer chips are now widely available, vehicle manufacturing has been slowly increasing, particularly since the United vehicle Workers resumed work following their strikes last autumn.

Trends in Car Prices: New and Used

According to statistics gathered by Edmunds.com, the average price paid for a new car in the US dropped 1.2% in January compared to the same month last year, to $47,338. From a peak of $48,516 established in December 2022, that represents a 2.4% decline. Despite the relatively small decline, analysts anticipate that costs will continue to decline this year, particularly for new cars as supply increases and manufacturers are forced to cut prices.

As of last month, the average price of a used car was $27,297, which is 3% less than a year earlier and 12% less than the top of $31,095 in April 2022. Analysts predict that after additional declines, used car prices will only marginally increase when the springtime peak purchasing season returns.

Automaker incentives on new cars, such as low-interest loans and rebates, averaged $1,469 per car in January, which is five times more than they did on average the previous year.

According to official data, there was no increase in the cost of new cars from December to January. Even yet, they have increased by more than 21% since the pandemic broke out in early 2020 and led to significant shortages of parts.

Although the average price of secondhand cars decreased by 3.3% last month to little over $27,000, it is still 32% more than the average before the outbreak.

Despite an increasing supply of EVs, the average cost of an electric car has increased 2% over the previous year to $60,630, according to Edmunds, in contrast to traditional gasoline-powered automobiles. However, experts claim that significant price reductions from Tesla and Ford, as well as the release of a few more reasonably priced models, should contribute to a decline in average EV costs.

Used cars, trucks, and SUVs are still in restricted supply, unlike new automobiles, which will probably serve to contain any price reductions. This is mostly due to the fact that low new car sales since 2020 have limited trade-ins and vehicles coming off leases, which has kept the supply of used automobiles under check.

According to Drury, the cost of certain one- and two-year-old cars is almost equal to what automakers are charging for brand-new cars. For instance, 2023 Honda Accord EX cars with little mileage are being offered for around $28,000. The base cost of a new one, including delivery, is not much more at $31,000.

Given the average 11.5% interest rate on used cars, it would be more economical to spend a little bit more for a new car in order to get a lower interest rate from the financing division of the manufacturer.

Popular, dependable automakers like Toyota and Honda aren't currently giving out as many discounts as others.