Anyone who has bought a car during the pandemic knows that salespeople have been in the driver’s seat, so to speak.
Growing demand for new cars combined with record low inventories allowed dealers to mark up prices and left buyers with little bargaining power.
But things are starting to turn back in favor of the consumer. In March, for the first time in nearly two years, the average new car sold for less than sticker price by about $171, according to Kelley Blue Book.
What does this tell us about the car market?
Well, the sticker price of a new car is set by the manufacturer. But buyers can haggle that price down or dealers can mark it up based on market conditions, according to Morningstar auto analyst David Whiston.
“Lately, with the chip shortage, some dealers, depending on your perspective, have been using the free market efficiently or ripping off consumers,” he said.
A year ago, the average new car buyer was paying nearly $1,000 above sticker price. But with semiconductor chip shortages easing, some automakers are ramping up production, said Rebecca Rydzewski, director of research business at Cox Automotive.
“With the increased inventory, dealers don’t have the pricing power they once had maybe six months ago,” he said, adding that new vehicles are still much more expensive than they were before the pandemic, in an average price of just over $48,000.
But more cars on the lot means modest discounts are making a comeback. Jessica Caldwell with the auto site Edmunds, said dealers hope the rebates will spur purchases despite high interest rates, which will increase buyers’ monthly payments.
“We’re making consumers really stop and think, ‘Do I really need a new vehicle?'” he said. “You know, ‘Cars are so expensive right now, I’m not sure what’s going on with the economy. I’m a little worried about my job’”.
David Whiston with Morningstar is one of those consumers sitting on the sidelines of the vehicle market. His family could use a second car, but he said it’s not urgent.
“I’ve just decided I’m going to wait for a much better buyer’s market. You can call me cheap if you want,” he joked. He expects a more favorable market to arrive late this year or early next, whenever it finally ‘end the chip shortage.
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