Prices at car dealers rose to an all-time high between 2021 and 2022 thanks to various factors related to the pandemic. However, 2023 appears to be the year when prices for new and used cars are starting to drop again.
Based on recent data, the average transaction price for a new car is below MSRP. The market conditions are gradually improving and should continue to improve through the end of 2023.
2023 New and Used Car Prices
There were several factors that caused record-high prices in the last few years. Factory closures early in the pandemic were one factor and then came the computer chip shortage. Essentially, work and supply chain issues led to the acceleration of high prices for new and used cars. However, by the second half of 2023, the prices for used cars began to decline.
The last few years have been a roller coaster ride for car dealers and consumers alike. For a long period, car dealers were making well over MSRP per transaction, but now, the average vehicle is being discounted with more manufacturer incentives in play.
Normally, buying a used car is a way to save money versus buying a new car. But in the last few years, that advice hasn’t held true. Market conditions drastically increased the prices of used cars as well as new ones. But now, when you visit car dealers, the inventory is piling up on both sides. Used car prices are headed inexorably down.
Prices Continue To Ease Through 2023
Despite the demonstrable easing of prices, industry experts think it could be a while before the vehicle market returns to previous levels of stability. One issue with the used market is the low supply of affordable models. Many car dealers have found their lots stuffed with expensive used cars with all the options. However, the majority of used car buyers aren’t looking for optioned-out top trims.
In the end, manufacturers will need to serve the market what it wants. Right now, the market is demanding affordable vehicles, not premium trims. It’s likely that buyers will start seeing more affordable vehicles hit dealer lots through the end of the year.
New Car Prices Slower To Ease
New car inventory has soared to its highest level in two years, but most of the increased inventory is still top trim models with all the options. The increased inventory has lowered prices for new cars somewhat, but the average price is still higher than before the pandemic. In the last few years, manufacturers decided to use what supply they had to build higher-end vehicles and send them to car dealers. This strategy drove up the average price of new vehicles.
However, it’s also somewhat backfired as a lot of brands are dealing with major overstock right now. Ram, Dodge, Jeep, Buick, Infiniti, Lincoln, and Chrysler have double the ideal stock of vehicles. Ford, Mini, Audi, and Genesis are also dealing with higher-than-normal stock.
Experts still recommend shopping around for lower prices, even if you have to go outside your local area. However, prices are definitely coming down across the board and should continue to do so through the end of the year and into 2024.
