When Will Car Prices Drop? Why Are Used Cars So Popular? 2022
When Will Car Prices Drop? Car prices have been on the rise in recent years, but when will they start to drop? It’s no secret that car prices have been on the rise in recent years. But when will this trend start to reverse? Many experts believe that car prices will start to drop in the near future, as more and more manufacturers enter the market and competition increases.
What vehicles are most affected?
Cars.com reports that older vehicles have experienced a more significant increase in value than newer models. While pickups and SUVs have seen a surge in demand, the most expensive cars, such as sedans, hatchbacks and coupes, saw the most significant price increases.
This is because new car production was more affected than trucks and SUVs, with automakers redirecting their limited resources to larger, more expensive models.
This is not to say that these vehicles didn’t go up in price. They did. However, the price increase was slower than for used cars.
Here’s Cars.com data showing an increase in median prices for used cars between December 2019 & December 2021.
- The number of used cars, which can be classified as sedans or coupes, has increased by 40%-52%.
- Pickup trucks for sale rose 23%-48%
- The number of used SUVs rose by 32%-41%
Why are used cars so popular?
The value of a vehicle is almost 20% lower when it is new. The vehicle’s value drops sharply after that. However, it will depreciate much slower over its lifetime.
Some customers don’t want to invest in assets that are so rapidly depreciating. Customers prefer to have someone else take the first hit of depreciation and then purchase a used car for a more stable investment. Used cars are more reliable, have lower insurance costs and require less financing (if purchased from a trusted dealer).
Why are used car prices so high?
The rise in used car prices is an indirect result of the increased costs of new cars due to a shortage in semiconductor chips.
Semiconductor chips are an integral part of car systems such as airbags and ABS, seatbelt safety tensioners (STP), radios, touchscreens, etc. The global shortage of microchips resulted from poor demand and constant lockdowns when the pandemic began in 2020.
However, as the market opened up in 2021 and Americans began buying more, microchip makers could not keep up with the increasing demand for chips for new cars. This led to stagnation in new vehicle production.
New cars are becoming more expensive, so the demand for used cars has increased dramatically, leading to current high prices.
When Will Car Prices Drop?
1. When will used car prices drop?
New-vehicle production is expected to rebound by the end of this year, so used car prices are dependent on new-vehicle production. We hope used car prices to return to normal in late 2022 and early 2023.
However, this does not mean that prices will return to pre-pandemic levels. KPMG and J.D. predict a drop in used car values of 20-30% over the next 12 months. Insiders in power predict a new normal where used prices will be 54% lower than the new (68% currently).
There you have it. You might be wondering if now is the right time to buy a used vehicle. But, if you wait for 7 more months, you can save thousands.
2. What time will new car prices drop?
Trends in new car prices have been closely linked to used car prices. New car production has been slowed by the shortage of semiconductors and other factors. Prices began to rise as fewer cars were on the market, and there was no drop in demand.
KPMG’s study found that U.S. dealer inventories fell to an all-time low in July 2021 and that new car prices have soared beyond MSRPs. The market is expected to balance, and prices will drop once automakers can produce average amounts of new cars.
The shortage of semiconductor chips is starting to improve. As new cars are produced, prices should drop for used and new vehicles.
Carcareportal’s forecasts and industry data suggest that this could happen in 2022. The market may then normalize at the end of the year or early next.
Here are some tips to help you buy a new or used car right now
1. You can shop in a wider area than you would normally.
Many people looking to purchase new cars are now willing to travel hundreds of miles, or even thousands of miles, to do so. Different dealers have different ways of handling the lack of vehicles.
You can purchase a car at a dealer located hundreds of miles away and then fly to the destination to pick it up.
Carcareportal recommends looking at all dealers within 500 miles of your desired car and visiting their websites to check for inventory. You can then email several dealers to find one that doesn’t mark the MSRP.
2. It would help if you didn’t spend more on a used car than on a new one.
He says that Carcareportal’s advice in the past about purchasing a vehicle older than one or two years doesn’t hold right now. A new car may be cheaper than a used one. You won’t worry about the vehicle being in bad shape or having problems.
3. Do not pay extra for convenience features.
Dealerships often stock cars with additional features that you might not need. You don’t have to buy a more expensive car than you expected, but it might be available on the same day.
4. Be patient.
It is possible to order a car online and then wait for it to arrive.
5. If you are able to avoid it, don’t buy now.
If you are unable to wait for the price to drop, don’t buy a used or new car. Take your time, wait for the market settle down and take your time.