By Lauren Fix
Many people have been waiting to buy a used car, prices were high, supply was low and the Fed raised its prime rate to the 4.25%-4.5% range by the end of last year and plans to raise it to 5% in 2023. As a result, the average new auto loan interest rate was 8.02% as of December, up from 5.15% in December 2021.
Cox Automotive says the average new car loan has a $785 monthly payment, up 29%, while the average lease payment is $661 per month, up 33% from March 2020 levels. The average transaction price of a new vehicle was $49,507 by the end of last year, up 5% over 2021. Now add in the chip shortage, which is still not resolved.
So when is the best time to buy a new or used car?
Over the last two years, a shortage of new cars caused by a shortage of microchips upset that strange balance of new and used cars available to dealers. Although dealer inventories are starting to build back up again, the supply is far off from the demand for new and used vehicles. To set your mind at ease, high prices are not here to stay.
New car and truck prices fell 0.1% in December versus November, the Labor Department reported. That’s the good news. The bad news is that the Federal Reserve’s aggressive quarterly hikes in base interest rates can make your second most-expensive purchase as hard to achieve as buying a house.
The used-vehicle market has stabilized, resembling the pre-pandemic normal, with inventory holding steady and prices dipping from their record highs, according to the Cox Automotive analysis of Auto Available Inventory data. Used-vehicle prices also are in decline. The average list price was $27,143 at the end of December 2022, which has shown some year-end strength.
If you’re looking to buy a car, SUV or truck in 2023, whether new or used, your prospects for the right vehicle purchase will be much different than in the past. Cox Automotive’s 2023 Industry Insights and Sales Forecast report warns that low-income and subprime consumers will find it nearly impossible to obtain car loans, because auto loan interest rates are at a 20-year high.
Now for some EV sales news; Tesla cuts prices across the board up to 20%. Tesla was oddly eliminated from the new EV tax credits. Tesla now gets the federal $7500 tax credit that includes the Model Y, which is priced under $55k at $52.9k. The IRS bizarrely classified the 5-seat, but not 7-seat, Model Y as a sedan, not an SUV. So now the Tesla it was subject to the $55k credit cap or $80k cap for SUV. It’s interesting to note that the Ford Mach-E is getting the same “car” designation.
Still, even with high average prices of $65,000, EV sales in the U.S. in 2022 soared, with many new models and higher interest rates. EV shares of the total market hit 5.8%, up from 3.2% in 2021. Tesla is still far and away the EV market leader and overall luxury vehicle leader, according to Kelley Blue Book estimates but Tesla’s share of the EV market continues to tumble, falling below 60% for the first time in Q4 of 2022.
Even with rapid EV growth, roughly 94% of new vehicles sold in the U.S. last year had a gas tank in the back and a combustion engine up front. There is a huge EV push but the market is a long way from becoming an EV market. Cox Automotive is forecasting 1 million EV sales in the U.S. for the first time ever in 2023, which will push EV share higher. With new government-backed incentives and fresh product set to launch, passing 1 million is all but guaranteed.
If you are considering an electric car, check out my content on “EV Tax Credit: What It Is, How It Works, and Who Is Eligible”. If you’re waiting to buy any new or used car, stand firm, if you can wait three to six months there will be more inventory.
There is so much more to discuss on this, put your comments below and let’s start the conversation.
Lauren Fix, The Car Coach®, is a nationally recognized automotive expert, analyst, author, and television host. A trusted car expert, Lauren provides an insider’s perspective on a wide range of automotive topics and aspects, energy, industry, consumer news, and safety issues.
Lauren is the CEO of Automotive Aspects and the Editor-in-Chief of Car Coach Reports, a global automotive news outlet. She is an automotive contributor to national and local television news shows, including Fox News, Fox Business, CNN International, The Weather Channel, Inside Edition, Local Now News, Community Digital News, and more. Lauren also co-hosts a regular show on ABC.com with Paul Brian called “His Turn – Her Turn” and hosts regular radio segments on USA Radio – DayBreak.
Lauren is honored to be inducted into the Women’s Transportation Hall of Fame and a Board Member of the Buffalo Motorcar Museum and Juror / President for the North American Car, Utility & Truck of the Year Awards.
Check her out on Twitter and Instagram @LaurenFix.
