Auto Prices Begin To Fall From Highs

She had good credit and down payment cash. Detroit dealerships lacked sufficient automobiles. Or they’d charge her $3,000 to $6,000 more. Months of disappointment depressed her.

Hudson was depressed. “I was angry.”

Auto Prices Begin To Fall From Highs
Auto Prices Begin To Fall From Highs

A 2022 Chrysler Pacifica dealer contacted in late September. $41,000 wasn’t cheap. Hudson wasn’t happy. The dealer asked slightly above sticker price, so Hudson couldn’t walk away. She has a van again.

It was terrible. Hudson made her purchase as new and used vehicle prices began to fall from record highs and more vehicles became available. A few months ago, Hudson’s vehicle probably cost more.

No one should expect prices to fall to pre-2020 recession levels. Automakers ran out of parts and automobiles once the recession ended quickly. Since then, prices have barely moved.

New and used car prices are 30-50% more than before the outbreak. Last month, used cars averaged $31,000. $47,000. Due to increasing pricing and lending rates, millions of consumers are priced out of the new-vehicle market and must buy used.

Despite weak sales, automakers are profiting from high prices. GM’s third-quarter net profit surged 36% mainly to sales of costly pickup trucks and SUVs.

As Hudson found, many cars are becoming cheaper. The 40-million-a-year used market showed signs weeks ago. Prices fell as demand dropped and stockpiles surged.

CarMax sold 15,000 fewer cars last quarter than a year ago. The Richmond, Virginia-based used-car company’s CEO cited inflation, increased borrowing rates, and lower consumer confidence.

“Buyer’s strike” “Adam Jonas, a Morgan Stanley car analyst, said the sales decreases foretell cheaper prices. According to Edmunds.com, the average used car price in September fell 1% from May.

Last quarter, AutoNation’s used car sales and profit-per-vehicle fell. While vehicle supply is low, used-car prices are falling, said CEO Mike Manley.

“Manley told analysts Thursday that our study showed falling values.

Ivan Drury, Edmunds’ head of analytics, said used prices won’t return to pre-pandemic levels for years. Since 2020, automakers have leased fewer automobiles, reducing one source of late-model used cars.

Rental firms can’t acquire many new cars. They’re selling fewer secondhand cars. This reduces vehicle supply. Used cars don’t sit long on dealer lots, so demand keeps prices high.

Lower-income buyers were pushed out of the new-car market when prices soared two years ago. Many couldn’t afford used cars. Subprime borrowers (620 or below) bought 5% of new cars last month, down from 9% before the pandemic. Tyson Jominy, vice president of J.D. Power, said many low-income households couldn’t afford cars.

Higher borrowing rates exacerbated the issue. Edmunds reports that used-car buyers paid 8.4% annual interest in January 2020, before the pandemic. $412 monthly payments Average rate was 9.2% last month. Since prices rose for two years, the average payment was $567.

The 1% average decline in used prices will assist purchasers with good credit get reduced loan rates. Poor credit and low salaries will wash out any price decline with higher borrowing charges.

The new-vehicle market caters to wealthy purchasers. Automakers use scarce computer chips to manufacture expensive, loaded-up trucks, SUVs, and other large cars with terrible gas mileage. The average price of a new car went down marginally from August but still $11,000 higher than in January 2020.

Glenn Mears, who manages five shops south of Canton, Ohio, says higher lending rates are limiting showroom visitation.

“We’re slipping,” “saying

Analysts predict computer chip and other part shortages will likely keep new-car prices high. More price decreases are possible. Last month, roughly 1.4 million vehicles were available on U.S. dealer lots, up from 1 million for most of the year.

Normal supply was 4 million before the outbreak. Inventory is tight and demand is high. Many consumers pay sticker price or more, like Hudson.

5 million U.S. customers are still waiting to buy new cars, says Jominy.

Many of these customers have built substantial wealth, especially in their residences, and are buying luxury cars. Inder Dosanjh, who oversees a 20-dealership group in the San Francisco Bay area, says many workers have earned pay hikes.

He said, “There’s lots of money.”

GM reported Tuesday that customer demand is steady. Automakers would like to build more vehicles, but slower manufacturing implies higher prices and profits.

Ford’s CFO remarked Wednesday that near-record new-vehicle prices are falling. Changes in consumer appetites Midrange vehicles are outselling option-laden cars, he noted.

Edward Jones analyst Jeff Windau says 2019 could be a turning point. As the economy weakens and maybe enters a recession, prices may fall as customers focus on their finances and what they can afford.

 

This story has been amended to show that 5% of new-vehicle buyers had subprime credit.

 

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