(NEW YORK) — Many Americans have put off buying a new sport utility vehicle or truck because of steep prices and high interest rates.
Now, however, may be the right time to upgrade that older model, industry watchers say.
“2024 is probably the best year since the pandemic to buy a new car,” Mark Schirmer, director of industry insights at Cox Automotive, told ABC News. “2021 and 2022 were really difficult years. Dealers are talking about discounts again … this was not happening 18 months ago. The shelves are full and there are more selections now.”
The pandemic supply crunch has largely been resolved, Schirmer noted, and deals on new vehicles are getting better — leading to higher customer satisfaction with the car-buying process.
Interest rates are still historically high — the average APY was 9.2% in December — but they’ve fallen from last fall’s peak, Schirmer said. Prior to the pandemic, interest rates for new vehicles ranged from 4% to 5%.
“As interest rates come down and discounts increase, some people who have been pushed out of the market may come back,” Schirmer said. “What we’re seeing now is a more normal market.”
Of course, it may be tough to score a discount on the hottest and latest models. The brands that have excess inventory on lots and are more likely to lower prices are Ford, General Motors and Stellantis, according to Schirmer.
John Lawler, Ford’s chief financial officer, said in November that the automaker was closely monitoring prices and would likely offer deep incentives to woo shoppers.
Consumers are also asking: Will the days of 0% financing on new models return?
“Never say never,” according to Nishit Madlani, a managing director at S&P Global Ratings, who added that he expects the level of incentives to rise in 2025.
“With inventory going up, we’ve shifted to a buyer’s market,” he said.
Madlani blamed elevated vehicle prices on fleet sales and Americans’ preference for gargantuan trucks and SUVs.
“The market is 80% trucks now and 20% sedans … people are willing to pay up for larger vehicles,” he said. “Auto sales have been resilient.”
Jessica Caldwell, head of insights for Edmunds, said drivers expect — and demand — more amenities in their vehicles, which can quickly increase the MSRP. The average transaction price of a new vehicle was nearly $49,000 in December, according to Edmunds data.
Moreover, hybrids and vehicles with big, V8 engines are also seeing huge interest from consumers and are selling at or above their sticker price.
Many Americans who are strapped for cash still cannot afford to finance luxury priced vehicles, she said.
“Prices are getting softer … but we’re seeing demand at the lower end of the market, at the price points people can afford,” Caldwell explained.
Low interest rates are available to consumers, she pointed out, but getting one often requires paying off the loan in less than four years.
“People can’t afford to pay a car off in 48 months,” she said, adding that “very few Americans buy cars in cash.”
Madlani, though optimistic about new vehicle sales, said a reversal in the economy and stubbornly high rates could cause consumers to become delinquent on their auto loans.
“We’re already seeing a higher level of younger people defaulting on loans,” he said.
The best deals right now may be on electric vehicles, with an influx of models and slower pace of adoption among drivers. The number of incentives on EVs is higher than the industry average and consumers can save up to 9% on the vehicle’s price, according to Cox Automotive data.
“The EV market is extremely competitive and there will be very intense pricing pressure for all players,” Madlani said.
Added Caldwell: “A lot of Americans are still not interested in making the switch to an electric vehicle. There needs to be more price slashing on EVs to get Americans to buy them.”
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