When Will Car Prices Drop?

The prices for cars are finally decreasing in the year 2023 due to various factors related to the COVID-19 pandemic, as the prices reached all-time highs between the years 2022 and 2021.

Based on recent industry data, average transaction prices are below MSRP and manufacturer incentives are rising, which is great news for buyers.

Howard Clark, a financial expert, predicts that market conditions for car sales will gradually improve throughout each month in 2023. Finally, the improving conditions have started to have an impact on the money and conditions.

When Will Car Prices Drop?“What’s happening now is large numbers of vehicles are being discounted at the dealers. Before, the dealers were adding on junk fee after junk fee. Now, they’re having to discount like the old days,” says Clark. “Manufacturers are having to have manufacturer and dealer incentives to fund some of that discounting.”

I will closely examine the current indicators as well as the new and used car markets in this article, which will discuss the downward movement of car prices.

This article was last updated in August 2023. I update it every six months with the latest industry data and Clark’s predictions.

Several things led to problems with pricing in the last two years. Clark cites early factory closures during the pandemic. Additionally, ongoing spread of COVID and a shortage of computer chips have affected assembly lines and workers. As a result, automakers have discovered that the shortage could allow them to make more money, resulting in record-high prices for both used and new cars.

Despite the decline, it is not a linear progression. According to Clark, the cost of pre-owned vehicles is beginning to decrease as we approach the latter half of 2023. Nevertheless,

When Will Car Prices Drop?“The industry’s been on an ugly roller coaster ride. Beautiful for them, ugly for you and me. But I’ve got good news: The roller coaster is now rolling downhill in your and my direction,” says Clark. “We were in a period for a long time where dealers were marking way up above MSRP and now the average vehicle is being discounted.”

Below, you’ll find additional details on when prices are anticipated to decrease for both pre-owned and brand-new automobiles.

When Will Used Car Prices Go Down?

Throughout the COVID pandemic, the market conditions for both new and pre-owned cars have not always held true to the average prices. Buying a used car is a great way to save money compared to buying a new car, especially in normal years.

The conditions of the used vehicle market are starting to improve, according to recent industry data on wholesale car prices, which leads to buyers.

When Will Car Prices Drop?“You go by dealer lots now, and except for Honda and Toyota dealers, there’s inventory piling up both now on the new vehicle side and the used vehicle side. Used vehicle prices are going down!”

Clark anticipates that the prices of pre-owned vehicles will continue to gradually decline throughout 2023.

The automotive industry becomes fully stable, although there is still a significant distance to cover. Nevertheless, by examining the graph, one can observe a persistent decline in prices compared to previous peaks. Manheim, an automobile wholesaler, recently published updated data on the used vehicle value index until mid-July 2023.

One major issue with the used vehicle market is the low supply of more affordable car models. Most shoppers aren’t looking for high-priced, top-tier models. However, car dealers have been overstocked with relatively expensive used cars that are optioned out.

During the course of 2023, Clark has forecasted that the market will experience a gradual improvement. Presently, we are finally witnessing a decrease in prices. It will probably take some time for the pre-pandemic prices to be restored in the used vehicle market, even though this decline will persist steadily on a monthly basis. Nevertheless, the current situation is more favorable compared to the previous couple of years as a whole, despite the ongoing recovery of inventory.

When Will Car Prices Drop?“But the other shoe has not dropped yet, and it’s going to! I can see it in my Clark crystal ball. Sometimes that crystal ball is really cloudy. This time, it’s clear as can be,” predicts Clark. “The manufacturers ultimately are going to have to serve the market with what the market is demanding. And the market is demanding lower-cost vehicles.”

As time passes, Clark states that you will witness an increasing number of budget-friendly vehicles (as well as more cost-effective variants of vehicles) available at dealerships.

When Will New Car Prices Go Down?

Prior to the outbreak of the pandemic, there has been a noticeable increase in the inventory, resulting in a drop in prices within the new automobile industry. However, it is important to note that a significant portion of the augmented inventory primarily comprises of luxurious, fully equipped models. In contrast to the pre-owned vehicle market, the supply of brand-new cars has reached its peak level in the past two years.

When Will Car Prices Drop?“Manufacturers had started sending the dealers only higher-end vehicles with all kinds of options and higher-end stuff on them to drive up the average price of a vehicle, and so the average price of a new vehicle has been averaging somewhere around $48,000 more or less,” says Clark. “At the same time, the number of vehicles unsold in the dealer manufacturer pipeline is now somewhere around two million vehicles!”

Currently, Cox Automotive has released a compilation of brands that are experiencing significant excess inventory. Ram, Dodge, and Chrysler vehicles have twice the recommended supply. In contrast, Lincoln, Buick, Infiniti, and Jeep have nearly twice the ideal stock, whereas Ford, MINI, Audi, and Genesis are also considerably overstocked.

Temporarily, you will have a lower chance of spotting these brands on car dealerships. Budget-friendly brands such as Honda, Kia, and Toyota are still facing challenges with their stock levels falling below the optimal supply, as evident.

The industry had seen the smallest increase in transaction prices below MSRP in a decade, from July 2023 to June 2023. Compared to June 2020, the average transaction price for a new car in June 2023 was about 27% higher, and there is no surprise or reason for this.

You may be able to strike a deal with a desperate dealership as a manufacturer increases incentives. Prices of new cars should continue to drop as the board across the car inventory continues to build up.

When Will Car Prices Drop?“The new vehicle market is rationalizing and normalizing, but it’s a process,” says Clark. “It’s a trend line. It’s not where it’s going to be.”

Clark says that the prices of new vehicles are really going to start getting better in the second half of 2023. He expects that you will see more and more affordable vehicles on the lots in the coming months. He also says that the same trend is true for electric vehicles. “They’re not holding value for the older generation of electric vehicles and they cost nothing to run. Used electric vehicles are a steal!”

Clark’s Top Tips on Buying a New or Used Car Right Now

While it may take a little longer to pay off the car, thousands of dollars could be saved by shopping around for a better deal at the shop. If you are currently shopping for a used or new vehicle, make sure to take the time to compare prices and avoid overpaying.

These are the top five recommendations from Clark Howard for purchasing a vehicle in the present market:

  • Avoid looking around the shop or ordering your car exactly, as features don’t require your attention. Instead, consider buying a higher-priced vehicle for the added convenience of a shorter wait time. Even if there is no cheaper model available, you can still expect to pay for those additional features. Many cars have fully loaded models with extra features, but keep in mind that dealerships often have a large inventory of these vehicles. So, it is not necessary to purchase a car with all the options.
  • Fly to a location close to the vicinity of where that automobile is located, make the purchase, and transport it back to your current location! According to Clark, he suggests that you can significantly reduce your expenses by exploring options within a 500-mile range from your residence. Seek out the exact brand and model that you desire, even if it requires traveling a long distance, rather than purchasing the fully loaded vehicle available at the nearest dealership. Broaden the scope of your search area.
  • When it comes to purchasing, finding the model and features you desire becomes easier at the appropriate price. You can explore a broader range of options from a reputable online dealership. Clark suggests that when the time comes to make your purchase, consider buying your vehicle online. Therefore, when the moment to buy arrives, it is advisable to shop online.
  • Joining a credit union can save you thousands of dollars compared to financing through a dealer, as Clark advises. Credit unions offer significantly more affordable financing options for both new and used vehicles compared to banks or car dealerships.
  • If you want to see better selections and pricing, you are likely to continue seeing more incentives as well as closer to the end of 2023. However, the market has drastically improved compared to 2020-2021 and the inventory and prices are gradually improving. The market conditions will be better for buying a used or new car. However, if you want to have a new vehicle as soon as possible, it is important to follow the above tips and be patient.
  • Final Thoughts

    During the course of 2023, prices are expected to steadily decrease every month. However, the circumstances are starting to get better, making it still not an ideal moment to purchase a vehicle at present.