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One of the best car-shopping weekends is more of a prependemic these days.
Amid the auto industry’s manufacturing challenges due to persistent supply-chain issues, Memorial Day sales this year are generally not below the minimum.
“It looks pretty bleak to be straightforward about it,” said Evan Drury, Insight’s senior manager for Edmunds. “It is becoming harder and harder for people to get a new car with the features they want at a price they are willing to pay.”
According to a combined forecast from JD Power and LMC Automotive, the average amount paid for a new car is more than $45,200, up 18.7% from a year ago. Drury said buyers are paying about $700 more than the sticker price on average.
Also, the average incentive offered by dealers has dropped to an all-time low of $2,996 a year ago at $1,034, as predicted by JD Power/LMC. Generally speaking, dealers don’t need to offer much as an incentive to sell cars these days.
In fact, despite sales momentum being 23.8% lower than a year ago due to lower inventory, the average profit per car at dealerships is $5,046 from $2,733 a year ago.
It is becoming harder and harder for people to get the new car they want at a price they want to pay.
Evan Drury
Senior Manager of Insights at Edmunds
“This elevated profit per unit level more than offsets the decline in sales volume,” said Thomas King, president of JD Power’s data and analytics division, in the forecast.
Meanwhile, facing limited inventory for a new vehicle, a growing share of buyers are turning to used cars instead, Durie said.
“A lot of new cars you see [dealer] Websites labeled ‘coming soon’ or ‘in transit’ are already sold out,” Durie said. “So long as you can’t preorder that vehicle and wait three or six months for it You’re going to end up in an old car. ,
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Durie said 45% of trade-in buyers are ending up with a pre-owned vehicle, compared to 35% a year ago.
Of course, there is some respite in the used car market. According to the latest data from the Bureau of Labor Statistics, average prices have increased by 22.7% over the past 12 months. Research by Edmunds shows that the trading volume averages $29,948.
However, this means that the trade-in value is also higher.
“For your own used vehicle, get multiple quotes,” Durie said. “Take advantage of that.”
Another thing to consider is the cost of financing. The average rate paid on a new car loan is ticking up. According to Edmunds, it jumped to 4.7 percent in April, up from 4.5 percent in March and 4.1 percent in December. Car shoppers are likely to run into higher rates in the coming months, with the Federal Reserve expected to continue hitting a key interest rate affecting consumer loans.
However, well-qualified buyers may be able to secure a good rate depending on the car.
“You can still get zero or maybe 1.9% financing,” Durie said.
For older cars, the average rate is 8%. Although, For certified pre-owned vehicles You may find special financing deals — which have usually passed a rigorous inspection and come with an extended warranty.
“It could be 1.9% or 2.9% or even cash back,” Durie said.
And while those used cars may cost more, you may end up paying a higher interest rate on the loan for a non-certified version.
“Even if you save money with a non-certified pre-owned car, you may end up paying more overall,” Drury said.