Buying a car is finally easier – but watch out for high interest rates and lingering inventory issues

  • Many shoppers are considering car purchases as the end of the year approaches.
  • Experts say it’s a better time to buy compared to last year, but there are still things to look out for.
  • Experts say interest rates are set this year.

If you’re looking for a new or used car before the end of the year or early 2023, industry experts have tips for getting the car you want at an affordable price.

This time in 2021 was a tough time to buy a car, but the tide has turned a bit now.

Easing supply chain crises means more cars per lot, lower used car prices, and demand returning to normal. This left 57% of consumers either ready to buy or with the model in mind, according to a survey.

But a new specter is haunting the year-end buying season: skyrocketing interest rates, experts say.

“You don’t have to compromise in every way, shape and form,” said Evan Drury, senior director of visions at Edmonds. But, “Today’s interest rates are so high that they have become prohibitively expensive in a way they have not been seen before.”

What can you do about sky-high interest rates?

Unfortunately, the answer: not much.

“There are not many ways to escape from them unless you are willing to change the car you buy,” Drury said.

“On top of that, you’re probably looking at 36-48 month financing terms versus what most people want to do, 5-6 years,” he added. This will likely lead to more people delaying the purchase.

But the backlog of people who have already been postponing their car purchases since the start of the pandemic may have no choice but to shop now, which will keep demand steady.

Because of this, Drury said, “I don’t know when anyone is going to quit until new car inventories are up, automakers decide to bite the bullet and throw in the incentives.”

New cars are more expensive than ever

The average new-car deal price hit a record high of $48,681 in November, according to Edmunds, and luxury car buyers were willing to pay up to $67,050. Drury still expects a luxury payment at the end of the year, but at a cost.

“BMW, Mercedes, Lexus, Audi — they don’t have financing deals anymore,” Drury said. “That just makes these monthly payment numbers even more shocking.”

Even without the widespread inventory shortages dealerships have seen during the worst of the pandemic, car buyers are still paying above-the-sticker price for non-luxury cars.

“If you look at the lower price ranges, really anything $50,000 or less — which is still a small amount of money — there are still premiums,” Drury said. “They still see people paying $1,500 more for just a regular sedan.”

Toyota dealership in Florida.

Toyota dealership in Florida.

Joe Riedel/Getty Images

What new cars to look for

“If you’re not buying a luxury car or an electric car, you may be in a much better position price-wise,” Brian Moody, executive editor of Kelley Blue Book, told Insider.

He added that in terms of luxury cars, there aren’t a lot of bargains to be found.

“Maybe you’re looking for something out of the ordinary, not a full-size pickup, SUV, or minivan—maybe something like a sedan or hatchback is a way to get the features you want, but at a lower price,” he said.

Used car dealer

Used cars are shown in the sales yard at Marin Acura in July 2021.

Justin Sullivan/Getty Images

Plan to move quickly and consider using them

Cars are still moving fast, said Zach Creel, industry analyst with TrueCar.

He recommends doing your research on which model is best for you ahead of time.

“Be as educated and prepared as possible ahead of time to avoid those scenarios where you get excited about the car and it turns out it’s sold before you can get to the dealer to see it,” he said.

Some brands sit on more inventory than others. Nearly 300,000 Ford, Chevrolet, Ram and Jeep vehicles were reported sold in early December, according to data from S&P Global Mobility.

Among the luxury brands, Mercedes-Benz and Lincoln still offer the most remaining 2022 vehicles in reported dealer inventory.

Car buyers may find a used car that fits their needs while holding out for lower prices surrounding new vehicles.

“If you’re looking for a new car, you may have a chance of finding a used car that can fit your budget and lifestyle for a while,” said Krelle.

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