November 30, 2022

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New car prices may start dropping soon - but get ready to pay more in interest

New car prices may start dropping soon – but get ready to pay more in interest

New car prices may finally start to fall in the coming months – but don’t expect to pay much less on a monthly basis due to higher interest rates.

“To our customers who refused to pay a sticker above to buy a new vehicle, your patience is about to pay off,” Adam Jonas, chief automotive analyst at Morgan Stanley, wrote in a note to clients on Monday. Thanks to stall sales The “deflation” could finally hit new auto prices, Jonas said, a 17-month high in auto supplies.

In a separate report released on September 28, JD Power also forecast lower list prices could come in the coming quarters thanks to higher interest rates, increased auto availability and deteriorating economic conditions likely to affect aggregate demand.

The drop, whatever its form, will be welcome to car shoppers. According to J.D. Power, new car prices are still near record levels: In September, the average deal price was expected to reach $45,622 — a record for the month, up 6.3% from last year and the fourth-highest price in any month at all. August set the record, J.D. Power said, with prices averaging $46,259.

The list of lower rates will come at a time when interest rates on borrowing for car purchases are at levels not seen in 15 years – close to 6% on average.

The result is that buyers with low incomes and low credit quality are eliminated from the market, according to Cox Automotive, while buyers of luxury goods will remain.

“New cars may eventually become more available only when most Americans can’t afford them,” said Jonathan Smoke, Cox’s chief economist, in a note published Monday.

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Alternatively, car shoppers may want to consider the used market, where dealers have just seen The biggest one-month drop in prices paid at auction since the pandemic beganAccording to Kelly Blue Book.

The average used car sold for $28,061 in August, the latest month for which data is available — a drop of $158, or about 1%.

Analysts at auto group also suggest that customers consider settling larger monthly payments to avoid paying more overall.

Evan Drury, Edmunds Insights Director, said in a statement Monday: “Consumers who want to save where they can think about the big picture when it comes to financing their vehicle purchase should be able to swallow it up for a much larger monthly payment, but If your end goal is to save money and stay error-free, you can save thousands of dollars by taking this step — just make sure the monthly payment you agree to is still within your means.”