3 Auto Trends to Monitor as We Near the Halfway Point in 2023
A car is a major purchase, so it makes sense that you might spend weeks or months figuring out your unique needs. After all, you need to determine whether you’re going with a new or used vehicle, how much money you’re willing to spend and what features are necessities and which are extras.
The state of the auto industry itself can also impact your experience. Unfortunately, you may be greeted by a lackluster buying environment if you plan on buying soon.
“Things don’t appear to be as bad as they were within the past two years when inventories vanished and prices skyrocketed,” says Matt Schulz, LendingTree chief credit analyst. “However, the combination of still-high prices and rising interest rates means it isn’t a spectacular time to go car shopping.”
Learn how current auto trends could impact you.
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No. 1: New car prices are at an all-time high
There’s a bit of a silver lining here though: Inventory for new cars appears to be bouncing back. And that seems to be translating into more sales. For example, Cox Automotive’s seasonally adjusted annual rate (SAAR) for new vehicle sales in April is expected to be almost 15.1 million, higher than the previous year’s 14.3 million.
For context, the previous drop in inventory was partially driven by the supply chain issues from production slowdowns during the beginning of the pandemic, as well as shortages of things like computer microchips. There was also a spike in sales in spring 2021 that further reduced dealership inventories.
Given the trend toward increasing new car inventories and sales, prices may start to dip in the coming months — but only time will tell the full impact.
No. 2: Used car prices may be coming down
Although new car prices generally went up steadily between April 2020 and April 2023, used car prices have had a different journey.
Prices for used cars and trucks have subsided somewhat compared to their peak in early 2022. Still, they’re nowhere near the pre-pandemic prices. For instance, April 2023 prices are 38.1% higher than in January 2020 — and 38.6% higher than in April 2020. So cost could still be a major concern if you’re looking to buy a used car soon.
At the same time, dealership inventory and sales of used cars and trucks have been declining. So you may have to buy your ideal used vehicle online or from a private seller. It might take longer than usual to find the perfect car or truck for you.
No. 3: Auto loan rates are high
If you’re planning on buying a car on credit, keep in mind that interest rates for car loans are the highest in the past 15 years. For context, here’s data — via Federal Reserve Economic Data (FRED) — that shows the average interest rate for a 48-month loan on a new vehicle.
Average interest rate for 48-month loans on new vehicles
|February 2020||February 2021||February 2022||February 2023|
Source: Federal Reserve Economic Data (FRED)
Although these rates are high, car loans can still be useful for those who need them. Even if your credit score isn’t where you want it to be, you might still be able to find a better interest rate if you do your research.
Those rates might be lower than you’ll find at a dealership, and you can then use them as a bargaining chip if and when you do visit a dealership.
That being said, when interest rates are this high, saving up for your car and paying in cash or taking out a smaller loan will probably be the best thing for your bank account in the long term. In the current environment, saving might take less time than you think.
“Savings account yields are now the biggest they’ve been in years, with banks offering 4% returns or higher,” Schulz says. “That means that extra savings can grow more quickly than you might think.”