About a year ago, I talked about a slight dip in the used car market and warned that it wasn’t a trend, just a short-term reprieve. I was mostly right. Both new and used car prices didn’t drop. But that is going to change now.
Most automotive manufacturers were running behind thanks to COVID. Production numbers from 2019 to 2022 were low as supply constraints and other restrictions took their toll.
By 2023, things were looking back on track, but then there were production problems as union worker strikes and continued supply chain issues kept a damper. By the end of 2023, most automakers were back on track and producing vehicles at about the same rate they were before the pandemic.
Now, however, there aren’t as many buyers as they’d hoped for. Most of the buyers in the market last year who were hoping to find something either figured something out or gave up. Inflation and high interest rates have pushed many out of the market entirely.
Used car prices have dropped a little, but not by much and new vehicle prices continue going upwards with inflationary pressure and costly technology pushes them.
There is, however, hope on the near horizon. Inventories at dealerships and staging lots for manufacturers are high. The dearth in sales versus manufacturing means that there are more vehicles available than there have been in several years.
Which means we’re going to start seeing desperation deals as manufacturers try to push inventory out of their lots and onto dealership lots and into customers’ hands.
With the 2025 model year looming (production of next year models usually begins about September-October), expect dealerships to start offering “cash on the hood” and other heavy incentives to move inventory.
Historically, deals when the market is like this have included cash incentives, free equipment upgrades, low-interest financing via the automaker’s financial arm, and “no cash down” purchase inducements.
The caveat, however, is that your used vehicle trade-in may not have its high value anymore. The used market, like the new market, is also about to transition as inventories grow. In short, the buy part will be easy, but there will be haggling if you plan to trade in your old vehicle.
Given what’s happening in the new car market right now, this push to move inventory is likely to continue through the summer. Most manufacturers hope to have the majority of their current-year stock off the shelves and on the streets by November in order to begin the push for their next-year models.
My guess is that by mid-July, most manufacturers will be offering heavy incentives to buy new.
There will be exceptions–mostly for models that are already popular and have no trouble leaving lots–and there will be some vehicles that are more incentivized than others.
But overall, you can expect to see a lot of deals being offered.
So if you’re looking to buy, this summer might be your chance to get past some of those high prices that might have made you wince.
Aaron Turpen can be reached at: TurpenAaron@gmail.com
