The Market
The pandemic led to an unprecedented global shortage of semiconductors and other vital materials used by automakers to design and enhance vehicles. These supply chain issues forced production slowdowns or shutdowns and ultimately affected output. This resulted in limited automobiles on the market and higher prices. As supply and demand would have it, fewer new automobiles available led to dealers charging over list price for cars and the creation of wait lists for specific models. Unfortunately, not only has the price of vehicles risen in recent years, but they remain on the high side well into 2023. Compounding problems for consumers are inflation and high interest rates, rendering the decision to buy a new car complex. Some consumers are now considering other options, such as buying a used vehicle or leasing one until prices drop.
Affordability
The reliability of newer cars, and the accompanying prestige of owning a brand-new vehicle, are undeniably satisfying. However, affordability is an important issue for most people.While some people pay cash for cars, most people require financing and keep a watchful eye on interest rates. Without a crystal ball, potential new car buyers must rely on financial forecasts to gauge what lies ahead. Though the start of 2023 hasn’t been the optimal time to buy a new car, some experts predict that new car prices will remain up for some time due to higher production costs, with perhaps slight decreases over the year. However, most suggest that no significant price drops appear to be in the immediate future. In addition to cost, multiple other factors can influence whether it’s a good time to buy a new car. Personal finance situations, flexibility, dealer sales, and trade-in values if applicable must also be considered. Credit history is important as it can be a roadblock for buyers with less-established credit.
Used or New?
One might think that buying a used car rather than a new one is a sound alternative. However, understand that the market for used vehicles is not the greatest now either. Though many experts believe that used car prices have peaked, and prices may now come down slightly, financing for used vehicles can still be challenging for a good number of people. Per Car and Driver, “Banks offer lower financing rates on new vehicles because they are inherently worth more and have not already been hit by depreciation.” Besides financing concerns, there are other important considerations to make when buying a used car. This includes factors such as mileage, condition, and fuel efficiency as examples. Consumers must also guard against buying cosmetically repaired flood damaged vehicles or those which have been in prior accidents. Researching the car’s history, performing a detailed examination of the vehicle, and buying from a reliable source may help protect consumers. Folks buying used cars should also have money reserved for repairs and maintenance not covered by warranty.
Leasing
Besides buying a vehicle, leasing gives shoppers another option. The main difference between financing to buy and leasing is that with buying, you own the vehicle when your monthly payments are up. Leasing generally requires minimal downpayments and frequently results in less expensive monthly payments. Upon leasing, consumers do not automatically own the vehicle in the end. Rather, they make monthly payments with the option to purchase in the end via a lump-sum payment. If they do not choose to purchase the vehicle they were leasing, they may return it and walk away, or restart the process to lease another new car if desired. Thus, leasing is often compared to “renting.” However, leasing penalties may be incurred for excessive wear and tear, exceeding mileage limits, or early lease terminations. Folks must take care to understand the conditions of their agreement.
Buying a new car is a large expenditure not to be taken lightly. Though the current market favors dealerships due to supply vs. demand, proper timing for buying comes down to multiple factors. Some are personal, such as credit score and need for a vehicle, while others are broad, such as interest rates and the overall economy. To answer the question of the ideal timing to buy a new vehicle, the answer depends on circumstances. In general terms, if one is in no hurry and the market is unfavorable, it’s likely best to wait. Note that toward year end, particularly from October to December, it remains a suitable time to shop for a new vehicle as dealers offer incentives to make room for new inventory. However, if it’s impossible to wait, don’t get caught up buying the first thing you see. Shopping around for the best value and financing is worthwhile and ultimately helps consumers keep more money in their pockets. Typically, buyers should avoid unnecessarily cutting into emergency funds to buy a car. Rather, save up some money first to lower one’s financial risk.
This article is for general informational purposes only and is not deemed as specific advice. As always, seek the counsel of a professional before making any important financial decisions.
