Buying a Car: Will Prices Drop In 2024?

Americans paid an average price of $48,334 for a new vehicle in July; down 2.7% since January.

According to Clark Howard’s money saving website, Kelley Blue Book indicates new car prices are dropping in 2023. The price of a new mid-size sedan averaged $32,242 as of July. That’s a drop of 0.4% since July 2022.

Electric vehicles showed the most significant price drop. The July average was $53.469, which is nearly 18% lower than the July 2022 price. 

The descent in cost is partly due to supply chain issues easing, especially for microchips. 

Even Lower Prices in 2024?

According to Car Market Forecast, shoppers shouldn’t expect much lower prices in 2024, although the market should stabilize. They predict a drop in production, which could lead to higher prices in 2024 for the fewer new cars for sale. Semiconductor shortages may again make an impact, raising prices in the next year.

Diminished Value of Georgia, an automobile valuation site, reports three main factors that affect new car prices: inventory availability, manufacturer incentives, and used car prices. 

The site notes excess 2023 inventory could lead to price wars at the end of the year as dealerships fight to clear vehicles from their lots when the 2024 models arrive. However, with the gradual transition to battery-operated vehicles and the aforementioned semiconductor shortages, the future of 2024 car prices is murky. 

Buy Now or Buy Later?

Car shoppers may wonder whether their best option is to buy a new car now or wait until 2024. Or perhaps they should buy a used car. Experts' answers are mixed.

Steve Birkett, Senior Editor of Find The Best Car Price, says, “Dealers are leaning into lease and financial incentives to stoke demand, rather than reducing prices. They are loath to leave behind the heady days of 2022, where limited supply made dealer markups a common sight, and it will take another round of sagging demand before they relent and start to stoke demand in other ways, such as lower prices.”

As for buying used, Birkett also notes, “Over the summer, there were more than 2 million used vehicles sitting on dealer lots, marking a new high for 2023.” 

With so many used vehicles to sell, it’s not unreasonable to assume dealers might be willing to drop the price to clear the lot sooner, making room for more new inventory.

According to Consumer Reports, used car prices are dropping, although they’re still much higher than before 2020. Interest rates are also higher, which may make financing a challenge for some buyers, especially for those with lower credit ratings. 

Burkitt offered this advice: “Expect higher prices and other price levers to be pulled for the rest of the year, which makes waiting until 2024 the right move for most car buyers.” 

If your credit is less than stellar, that waiting could be put to good use, to improve your credit score between now and when you apply for a loan.

Getting The Right Car

Whether a shopper buys new or used, they will take the same basic steps.

Start off by looking at your budget. How much car do you need, and what price can you afford? Check your credit rating and take any necessary steps to improve it. Consider what monthly payments you can afford, recognizing that a lower payment usually comes with a longer loan term, which increases the interest over the life of the loan.

Second, a shopper needs to do just that — shop around. You should look at several makes and models in their desired car class, then narrow their choices down to the three or four you like the most. Compare prices and see which ones fit best into your budget.

The next step in buying a car, new or used, is to get pre-approved for a loan. This gives you more options when buying, and limits the chance you’ll purchase something outside your price range when faced with a fast-talking salesman, or ‘the special deal’ their manager offers. When you come in pre-approved, you can compare dealer financing to what your bank or credit union offered. In some cases, the dealer’s financial manager may be able to offer better interest rates, which is usually to the buyer’s advantage. Just be on the lookout for additional fees and read everything before you sign it.

Fourth, check in with your insurance company. You may be eligible for a bundle discount If you already have a policy with the company. Some insurers also offer safe driver, safety equipment,  and theft deterrent discounts.

Drivers over 50 may be able to take a defensive driving course for seniors for another drop in their premiums. Ask for every discount you may be eligible for and get an estimate of how much the premiums may increase — or decrease — for the vehicle you want. 

Most experts recommend always taking a test drive, get a mechanic to check a used car, see if any warranties still cover a used vehicle, and ask the dealer for an out-the-door (OTD) price. 

The OTD price includes all taxes and document fees, and may be negotiable if you’re paying cash. Buyers should also discuss down payments and trade-ins if they have a vehicle to trade.

Once the shopper is satisfied with the OTD price, they can sign all the paperwork, get the keys, and drive home in their new or new-to-them vehicle.

This article was produced by Media Decision and syndicated by Wealth of Geeks.