New Car Prices Dropped By More Than $700 in February
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If life feels more expensive than it used to, that is likely because it is. From home prices; to groceries; to clothing; to buying a new car, everything hits your wallet a lot harder than it used to. Turns out printing a ton of money back in 2020 might have been a costly idea! Hindsight is fun, isn’t it?
For a second consecutive month, new car prices are declining, this time dropping more than $700 per car on average. While that savings might not make you buy a G-Wagon instead of a Toyota Corolla, it is still a step in the right direction.
According to the latest data from Kelley Blue Book (Cox Automotive), the average sale price of a new vehicle is down to $48,763 in February. In January, the average sale price was $49,468. Sure, prices are improving in consumers’ favor, but new car prices are still $2,466 higher than a year ago.
Per Rebecca Rydzewski, a research manager for Cox Automotive, “The transaction data from February indicates that prices continue a downward trend at the beginning of 2023. High loan rates and continued inflationary pressures appear to be hurting the lower part of the market.”
How We Got Here
New car buyers have been patiently anticipating a decline in prices in response to the Federal Reserve’s rate hikes, which aim to curb inflation. Higher interest rates make borrowing more expensive, increasing the cost of auto loans. Car dealerships are starting to feel the squeeze because Americans are delaying car purchases due to inflation.
While higher borrowing costs caused monthly declines in home and used car prices last year, new car prices continued to rise. Despite low supply, the average sale price for a new car hit an all-time high of approximately $50,000 in January. Finally, new car prices may now be starting to weaken.
Is Now A Good Time To Buy A New Car?
While it is encouraging to see the price of new cars decline, a buyer should remember that the average auto loan rate for a new vehicle is still at 8.4%. That is a lot of interest to pay on top of the negotiated sale price of a new car.
All that said, if the current price reduction trends continue, and dealers begin to worry about their bottom line, we could find ourselves in a buyer’s market soon.