New car prices have increased slightly, but it’s unlikely to signal a trend. Used car prices also rose somewhat, but they’re still well below where they were at this time last year. Interest rates are still high and no one knows when cuts might happen. Prices for both used and new cars fell in the first quarter of the year before rising last month.
Are Prices Going Up?
Despite the increase in prices last month, most industry people don’t believe it’s the start of a long-term trend. The real issue is concern that buyers will stay home. Many dealerships are oversupplied and they might start offering discounts to draw buyers.
Right now, both automakers and dealerships are oversupplied with new cars. Those extra cars on the lot are good news for those shopping for a new car. If you’re shopping for a used car, the picture is cloudier. The supply shortage caused by shutdowns during the pandemic is likely to affect the market for years to come.
Most dealers are still lowering prices to draw shoppers. However, everyone is watching for the point when interest rates go down. Until they do, dealerships can only lower their prices to attract buyers.
What To Expect If You’re Buying a Used Car
Used cars cost an average of $25,571 in April, which is exactly $31 higher than the average price in March. It’s not a big jump, but prices could get a bit higher as wholesale prices went up in May and that usually translates to higher retail prices in a few months. Overall, used cars are less expensive than they were a year ago.
However, if you’re looking for a used car, it’s no secret that the supply is thin. It’s likely to remain that way for some years yet. Roughly 8 million cars were never made during the pandemic, which means those cars won’t reach the used market, keeping supplies low.
The good news is that dealers are generally being reasonable with prices to attract buyers. If you’re looking for an older, higher-mileage car, there’s less to go around and dealers have an average 36-day supply.
What To Expect if You’re Selling or Trading a Used Car
If you’re in a position to sell a car without buying a new one, right now is a great time to do so. If your vehicle is in high demand, you can likely get a higher price for it at this point. Selling privately is usually more lucrative, but if you don’t want the hassle, you can also sell to a dealership.
If you’re trading in a car, some of the same news applies. Used cars are in demand and you’ll likely get a good offer for your used car if you trade it in. It’s a good idea to shop your trade-in around. The first dealership you see might not need your car, but it might be in high demand at the dealer next door.
Looking ahead, much depends on whether interest rates are cut. As long as rates remain high, many shoppers are going to stay home. Prices are good, but if you have to borrow, it doesn’t mean much.
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