Bay Country Finance’s Outlook for Vehicle Sales in 2023: Used or New Cars?
Due in part to the COVID-19 pandemic, the outlook for new car sales is less stable now than at any time since the production shutdowns of World War II. And while 2023 is showing signs of at least a little improvement, the outlook for the coming year’s car market—both new and used– is a still mixed bag.
A lot of people are asking “Is this a good time to buy a car?” The answer to that is “That depends.”
While new cars have reached all-time, record-high prices, used car prices are starting to fall – and are expected to continue to slowly ease throughout the new year.
After a wild ride since the COVID-19 pandemic, used car prices stabilized in September, continued to decline in October, and fell again in November 2022. In fact, even the wholesale price that dealers pay for used cars have fallen by nearly 15% in 2022. When wholesale prices drop, retail prices follow—one of the many reasons this steady downward trend in used car prices is expected to continue, and be with us through 2023.
Customers on the hunt for a good value in a used car will need to exercise patience, as older, less expensive vehicles may be hard to find. Surveys by Kelly Blue Book show that Americans are keeping their cars longer than ever before—the average car on U.S. roads is 12.2 years old. Add that to the fact that automakers produced fewer cars for several years following the 2008 recession and the result is fewer, high-mileage used vehicles on the market.
Dealers have a limited supply of cars priced under $10,000 and cars priced under $15,000 https://www.kbb.com/best-cars/best-used-family-cars-under-15000/are also going to be few and far between. The most successful used car shoppers are the ones willing to extend their budgets into the $30,000 range.
Customers in the market for a new car should prepare for sticker shock and some difficult barriers to overcome:
High Prices
At the root of rising new car prices is the fact that the COVID-19 pandemic greatly affected both the supply and demand of microchipshttps://www.kbb.com/car-news/microchip-shortage-still-limiting-car-production/, creating a worldwide shortage.
Not that long ago, microchips– those tiny processors that control everything from the car’s interior temperature to its traction-control system—were only onboard in the most expensive, luxury cars. Today, microchips are integral to every make and model of vehicle. This microchip shortage, despite automakers’ concerted efforts to ramp up production, has made it increasingly difficult for the industry to produce new cars.
Supply Issues Remain
European automakers continue to face supply shortages due to production problems related to the war in Ukraine, combined with COVID lockdowns in Asia in early 2022, are keeping the supply chain stalled. Although some progress has been made, it is taking longer for automakers to build their inventory to pre-pandemic levels.
High Interest Rates
The Federal Reserve enacted six interest rate hikes in 2022 alone, pushing auto loan rates to a two-decade high. These high interest rates, combined with high prices, have made a new car more difficult to afford than ever before. In fact, the average new car buyer signed up for a monthly payment of $762.
While rising new car prices and discouraging market trends for 2023 are going to make it tough for many customers to buy new, there continue to be enticing opportunities in the used car market. If you’re a vehicle finance manager of an independent or franchised bad credit car dealer within Maryland, Delaware, or the surrounding area, Bay Country Finance has the flexible financing solutions you need to get your customers on the road!
Contact us at Bay Country Finance, the one-stop shop for all your vehicle financing needs.
