It’s been a wild ride in the auto industry over the past few years. Inventory has decreased, prices have increased, and demand has increased. With so much uncertainty surrounding the car industry, car buyers have questions about prices they may have to pay in 2023 before they head to the used car dealership. Take a look at what some experts think will happen to vehicle prices over the next year.
Projected Used Car Trends in 2023
Used car prices started to go down at the end of 2022, and many experts expect this decline to continue in 2023. While a freefall is not expected, sticker prices will continue to trend downward and become even more negotiable as we get deeper into the year. There is a large demand for affordable used cars, and with prices falling, used car dealers are having a harder time recouping their money because they had to pay so much to stock their lots with used cars during the shortage.
Used cars are now sitting on dealership lots for longer, forcing dealers to lower their prices, but they are doing it slowly in hopes of hanging on to at least a little profit.
Projected New Car Trends in 2023
The new car price trends for 2023 look much different than used car prices. Don’t expect to pay less for a new car in 2023. MSRPs will stay the same. New car inventories are slowly increasing, giving buyers more options and, in some cases, more negotiating power, especially if they are looking at gas-powered models. Inventory numbers are still lower than they were before the pandemic, but dealers are clear in their message that they will probably never be as high as they were before 2020.
There is a lot of demand for new cars as buyers have had to put off upgrading to the latest and greatest model for a few months or even years, and they are looking for hybrids and EVs. We can expect popular models to fly off dealer lots almost as quickly as manufacturers can build them.
How Will Interest Rates Factor In?
The rising interest rates will significantly impact the demand for new and used cars. Even with lower prices, it is more expensive to buy a car if you need to take out a loan. The uncertainty of a recession is also keeping some car buyers away. These two factors are giving automakers a chance to catch up on their supply and get their inventory to where they want it.
Incentives Are Still Low
We might not be seeing the increased prices and markups that we saw during the chip shortage and inventory issues, but manufacturer incentives are still lower than ever. In early 2020 incentives were often as high as 11% of the transaction price, and they are now about 2%. This is because most automakers are intentionally keeping their inventories low. As a result, they don’t need to offer extra incentives in order to push extra inventory off their lots to make room for newer models.
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