As inflation spikes in the U.S. and demand keeps building, buyers shouldn't expect to find a good deal on a new or used car, experts say.
The average vehicle listing price for a new vehicle was $39,833 in April, 7.9% more than in 2019, according to Kelley Blue Book, a vehicle valuation website. Prices for used vehicles hit an all-time high in May, averaging $22,568. At the same time, incentives are down 25% from one year ago, according to Kelley Blue Book.
There are multiple factors at play here, said Kelley Blue Book editor Matt Degen. The first is the microchip shortage, which means cars can't be built completely. Second, some automotive factories were closed during the coronavirus pandemic, limiting the number of new vehicles that could be produced.
Those factors, combined with high demand as the U.S. reopens, means buyers shouldn't expect many deals from dealers or manufacturers, said Ivan Drury, senior manager of insights at Edmunds.com, an auto research company.
"You're going to pay whatever the sticker price is for your next vehicle," Drury said. "There's not a lot of discounts to be had."
That said, there are still a couple of strategies buyers can use to make sure they get what they need at an affordable price. Here's what the experts recommend.
SUVs and pickup trucks are popular, which means there won't be many deals, Degen said. He advises going for less-popular makes and models, such as Fiat, or for vehicles that are being discontinued. Kelley Blue Book and Edmunds also routinely update lists of the best deals.
Degen suggests comparing pricing on Kelley Blue Book or AutoTrader. This will tell you what the price should be so that you don't overpay.
"We really haven't seen a market like this before," Degen said. "Just have patience."
Most of the time, personal finance sites advise against leasing a car, because you're putting money, including a down payment, on a car you won't keep.
But Drury said these are unique times. He suggested that if you can't find the car you want, you could lease for a few months to a year, until inventory recovers and prices drop. You'll likely pay less month to month for a lease, and you won't be stuck with a car you don't like, he said.
"Do yourself a favor, think of it as an extended test drive or rental," he said. "A year from now, you can go shop again."
This will also ease the stress of researching and shopping around for a car right now and save you from settling. "It is a long-term commitment, so go enjoy your summer post-pandemic," Drury said. "You don't want to lease forever, but in this regard you're leasing happiness."
While shoppers won't find many, if any, deals, the opposite is true for sellers. You can make a lot of money now if you sell your car or even have a dealer buy out your lease early, said Drury. In many cases, they may be willing to pay for the rest of the lease and add a little bit extra on top.
This is especially useful if your circumstances have changed in the past year or so and you've decided you're okay downgrading from, say, a two-car household to a one-car household, or to no cars at all for the time being, Drury said.
"Dealers need your vehicle more than you do," he said, advising sellers to get offers from multiple dealerships. "So shop your vehicle. Dealers will take anything."
Overall, Degen said, it makes sense to wait if you are able to and you don't like what you're seeing right now. You don't want to rush into something and then need to resell it in a year or so at a steep depreciation.
"Everybody needs to take a breath and have patience in this environment," Degen said.