Yahoo Autos Should You Wait to Buy a Car?
Used car prices are at record highs as demand continues to exceed supply amid the ongoing microchip shortage. Used car prices are up 30.4 percent over last year, which amounts to more than $8,000 in average price increases for a used vehicle compared to last year. New car prices have risen too, with the average new car transacting above sticker price. Car companies have also slashed incentives due to the shortage of new cars, which has elevated the average price paid for new cars and caused buyers to pay over MSRP.
The current car market has led many consumers to wonder if they should buy a car right now or wait for prices to come down. Here are some important car buying tips to help shoppers navigate the challenging new and used car market.
1. Wait If You Can
The best financial decision is to wait to purchase a new or used car and to keep your current car for as long as possible. New car inventory is expected to improve beginning in the second half of 2022, which will also create more used car inventory as buyers trade in their old cars. However, the longer you can wait the better, as there is a lot of pent-up demand in both the new and used car marketplace. Higher prices and reduced inventory on dealer lots are expected to persist well into next year. Also, used car prices have fallen since January, but will likely rise in the next couple of months as consumers receive their tax returns.
2. Be Flexible
It’s important to be flexible if you need to make a new car or a used car purchase. That means if you want the best possible deal, you’ll likely have to be flexible on the make, model, trim, and color of the vehicle. For new cars, many of the most in-demand cars are selling for above MSRP. To avoid these price hikes, you can consider a less-popular model that may not have the same price increases. Or, you may have to settle for a different vehicle trim level or color. The same goes for used cars, as less popular models will likely not command the used car price increases as the most in-demand vehicles. Being flexible also applies to where you are looking for the car. If you are willing to cast a wider net to neighboring states, you will increase your chances of finding the vehicle you are looking for, and time/energy spent retrieving the car could still save you money overall.
3. Trade-In While the Market is Hot
If you have a vehicle you can trade in, you should take advantage of the high trade-in values. Perhaps you have an extra vehicle that you don’t drive often or maybe you are a city-dweller who can make due without a car. You can even consider trading in a more expensive gas-guzzler like a pickup truck for something more fuel-efficient like a sedan or electric vehicle (EV). Even though small vehicles, hybrid cars, and electric cars are in high demand right now, you could end up saving money in both the short and long term by purchasing a more efficient vehicle.
4. Consider Buying Out Your Lease
Just like new and used car prices, lease rates are also high right now. If your lease is ending, your best financial decision is likely to take advantage of your vehicle’s high residual value and purchase your car at the end of your lease term instead of leasing another vehicle. When you signed your lease, you were given a buy-out price. And because the start of your lease was before the pandemic, supply chain issues, and chip shortage, that buyout price is likely well-below current market value. That means you can buy your car and either sell it for a profit or keep it as your transportation until the market stabilizes.
