New research shows that financing a new or used car is more expensive than ever.

A record-setting 15% of people who financed their new cars in Q4 2022 cost them more than $1,000/month. Moreover, there’s still an ongoing chip shortage and increased raw material costs. In the U.S., the average price of a new vehicle was up 6.3% in the last year. 

This leads to the question, “When will car prices drop?”

The answer is, in short: Now. 2023.

J.P. Morgan Research predicts prices will decline by around 2.5% to 5% for new cars and 10% to 20% for used cars in 2023.

“There are some glimmers of normalization, with prices finally easing somewhat, though conditions remain far from normal. Looking ahead, we expect much less moderation in new vehicle prices than in used vehicle prices,” said a J.P. Morgan Analyst.

So if you’re car shopping, there might be some relief ahead. You may even find a few bargains in the coming months. That’s the good news. The bad news is that you’ll still need to be financially prepared to drive away with the best deal.

Used Car Prices Have Likely Peaked

The chances of recession go down by the day.

The Federal Reserve recently started slowing interest rate hikes to 25 basis points; in non-nerdy terms, you might not be paying as much on your car loan.

In addition, car makers are also pressured to reduce prices to remain competitive.

“While industry conditions are likely to normalize to some degree in the second half of this year and while many commodity prices have reversed, earnings reports so far this season seem to confirm that the road to recovery may be less rapid and less linear than earlier thought,”

-J.P. Morgan

According to estimates from J.D. Power and LMC Automotive, the average price paid for a new car in December is at a record $46,382. What goes up must come down.

But it won’t happen all at once.

Analysts say the decline will be gradual, with prices declining by 2.5 percent to 5 percent in 2023.

You won’t see much decline for new cars yet, but used cars will become more affordable, with a decline of 10 percent to 20 percent in prices. That’s good news for budget-minded car buyers.

When Will Car Prices Drop?

Despite the current optimism, a recession is still lurking in the shadows.

Recession or not, the car market will remain competitive. Carmakers are always tweaking incentives and financing deals to keep buyers in their showrooms.

If the economy does take a turn for the worse – which is not currently being indicated; look at the stock market – car buyers can expect to see even steeper discounts and better financing packages.

The one indicator to watch for is gas prices.

High gas prices are always an indicator of a possible recession.

And, even at their highest, when adjusted for inflation gas prices were far below 2008’s peak.

Survive, By Any Means Necessary

Ready to rule the car market?

If not, here’s a good place to start: follow what they do on Wall Street.

When everyone is clamoring over their dream cars and throwing money around, you know it’s time to tap the brakes – literally! And when others are too scared of taking any risks in buying or selling vehicles…you could be sitting pretty (and driving away with some great deals) if you stay brave and bold.

That’s what makes 2023 a great year to get a car. Prices are coming down, but consumer sentiment is still bearish.

That means it’s the perfect time to get a great deal if you know how to navigate the market. And with any luck, by 2023 you’ll be driving off into the sunset in your dream car – at a great price.

So don’t fear sticker shock; just be smart. With the right knowledge, you can find the best deal and drive away with a great car – no matter what happens in 2023!

What to make of this current car market? That’s the question on everyone’s mind right now. Should I buy a car right now?

The answer is, of course, yes – but it’s complicated.

“Is it going to get better? That is really hard to say,” said Michelle Krebs, an executive analyst for Cox Automotive, which owns vehicle-information websites like Kelley Blue Book and Autotrader, “because, are we going to have a recession, or are we not?”

However, what has dealerships and customers – yes you – optimistic heading into 2023 is that the odds of a recession hitting are going down. Inflation is decreasing, the FED is cutting interest rates, and car dealerships are struggling to keep inventory off the lot, causing car prices to drop like a rock.

Plus, with lower rates and refinancing options, the car market is ripe for buyers looking to upgrade.

It’s still a complicated market out there –  so, here’s what to look for:

Should I buy a car right now?

According to Cox Automotive, car supplies across dealerships are up 72% since Jan. 1. There are now 620,000 more new vehicles on lots than at the same time last year.

Due to supply chain issues – that are on the tail-end of being fixed –  dealers have an abundance of vehicles.

WE ARE SITTING ON SUPPLY.

That means there’s plenty to choose from, and you may be able to get a great deal on your new wheels.

Moreover, domestic brands like Ford and GM are nearing record inventory.

Automotive News reported last week that Ford dealers are at 60 days supply, GM at 52 days, and Stellantis (the merger of Fiat Chrysler and the French PSA Group) at 68 days. We here at Queens Auto Mall sell all these automakers.

Good News, and Bad News

Did you hear the good news?

We might miss a recession here in the US.

Or, it might just be a mild one like a summer breeze.

Either way, the Federal Reserve has begun to discuss slashing interest rates to new lows. This makes it easier to finance or refinance a car. The bad news is these are projected interest rate cuts.

They haven’t happened yet.

But many economists are expecting interest rates to come as early as Spring.

The upshot is that sometime in 2023 the Fed will be forced to lower interest rates, which could help you get a sweet deal on your ride.

The Old Ways Might be Dead

The car market has gone through a complete revolution within the past year, with just 1.4 million vehicles available for sale – down from 3 million before COVID came about!

Automakers have never been so busy and profitable; it might be safe to say that we won’t return to pre-pandemic days anytime soon: We’re entering a “New normal.”

Dealerships are also struggling since they can’t carry as much inventory as they’d like; they used to carry a 90-120 day supply but now only hold 40-50 days’ worth. The upshot is that this is an entirely new economic paradigm, meaning there might not be a better time to buy than now.

What’s Up With Used Vehicles?

The used car market has been a Catch-22 since the pandemic started.

For a while, car experts warned against buying used vehicles because the market was so in-demand and prices were so high.

So, what to make of it?

Data from Cox Automotive says used vehicle inventory at dealerships is close to 2019 levels. Prices are slightly lower than a year ago, with used car prices falling by 1.3% and CPO vehicles dropping by 3.2%. While vehicle demand is still sky-high, prices seem to be stabilizing.

Final Thoughts

Should I buy a car right now?

If you’re still asking that then rest assured, now is the time to buy if you’re in the market for a new or used car. Prices are declining and dealers’ inventory is finally catching up. Plus, with lower interest rates and refinancing options, it’s an ideal time to upgrade or get a better deal on your ride.

However, it’s important to remember that car-buying is always a complex process. To ensure you get the best deal, make sure to do your research, read reviews, and find out all the facts before signing the dotted line. Good luck!

Happy car-shopping! :)