Where Are All the Cars?
Have you tried to buy a car lately? Are you thinking about buying a car? Have you heard someone mention buying a car? Unless you’ve been living under a rock for a while, you might have noticed car prices are through the roof, there is no inventory, and, if you want to buy a new car, you are going to have to wait.
We have seen a lot of shortages since the start of the COVID-19 pandemic, with cars being one of them. There are numerous reasons for why this is the case. People were driving less and, therefore, less likely to buy or trade-in. Once work and travel restrictions started to lift, here was a mad dash for trade-ins and purchasing, which reduced inventory that hasn’t been replaced due a chip shortage as a result of the broken supply chain.
According to Kelley Blue Book, the average cost of a new vehicle exceeded $47,000 at the end of 2021 – up more than 25% in just two years. Average used vehicle prices saw an even steeper rise, going up 42% from under $20,000 at the end of 2019 to over $28,000 two years later.
People spend a lot on cars. In fact, a recent CNBC article suggest that 16% of the average American’s total budget is spent on vehicle cost and fuel. So what do we do with this information?
When thinking about buying a car there are a few things to consider.
What are your plans for use? Offroad or towing – SUV or Truck; Daily Commute - a car or electric vehicle.
New or used? Right now, it depends on the car. Not so long ago you could purchase a really nice lightly used car for a decent discount making a used car financially more attractive. At the moment, some cars are in high demand and a new car is actually cheaper, you just have to wait for it to be built. The used version of the same car, without having to wait, could cost you significantly more.
How do you plan to pay? As of the writing of this article, I was quoted 2.45% to 3.55% based on the year of the vehicle and length of loan. At these rates, is still makes sense to finance the car purchase, opting for contributions to investments to make the loan work in your favor instead of paying cash for the vehicle. You might be unaware but don’t have to finance through the dealership or car lot. Before having your credit run it would be wise to ask about their current rates and compare with other lenders.
When do you need the vehicle? We can’t predict the future price, but right now you aren’t going to be able to negotiate much on the sticker price. If you google the best time to buy a car, you will find a variety of theories. Presidents Day when sales are slow, Labor Day when the summer is coming to an end, New Year’s Eve when the year comes to an end, etc. I’m not sure there is a best holiday but having patience and planning out your purchase will help to avoid making a rash or bad decision.
Have questions or want to continue this conversation? Give us a shout!