When Will These Insane Car Prices Go Down? (& What to Do Now)
I am a serial entrepreneur and a consumer advocate. When I’m not helping car buyers, I love working on ventures that have a positive impact.
I run a cause marketing agency and serve on the board of Vayu Global Health where we are disrupting the medical industry and preventing the needless deaths of mothers and babies during childbirth.
In the past few years especially, car prices have skyrocketed, while car availability has fallen.
If you really dig cars (like we do here at FindTheBestCarPrice), this just…sucks.
So when will these absolutely bonkers car prices go down? How long must we wait?!
Let’s get into it and see if there's any good news on the horizon.
Related: Car Models With the Highest & Lowest Markup for This Month >>
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Why Are Car Prices So High Right Now?
What caused the issue in the first place?
Well, there are a few culprits to blame here.
For starters, the COVID-19 pandemic has caused complications for every industry, and the auto industry is no exception to this. Due to supply chain issues across the world, there are simply not enough new cars being manufactured to keep up with demand. And when demand is higher than supply… well, prices go up.
For some context, before the pandemic, around 2 to 3 million new cars were manufactured each year. Today, that number is less than 1 million.
Perhaps the most surprising part of the supply chain that has significantly messed with new vehicle production is the manufacturing of computer chips. These computer chips are used in new cars for everything from Bluetooth to GPS systems and even engine functions, so a reduction in the production of these makes creating new high-tech cars impossible.
With the shortage of new cars being produced, more and more people are having to buy older used cars instead, driving up prices in that industry as well.
Just how much have these prices increased? In pre-pandemic 2020, the average new car was typically purchased at a price point of $2,000-$3,000 under retail price. Today, customers regularly pay more than $250 over the suggested retail price for that same car.
Used cars have seen an even more severe increase in prices, up to around $25,000 from around $18,000 before the pandemic.
When We Predict Car Prices Will Drop
So when are car prices going to return from the moon?
While we can’t look into a crystal ball and tell you exactly when cars will become remotely affordable (if only, right?), we can use our knowledge of past car industry trends to try and predict how soon those prices will start to drop.
When Will New Car Prices Drop?
We hate to be the bearers of bad news, but it’s not looking great.
Many dealerships can’t help but notice that having a stripped-bare inventory with high, non-negotiable prices that consumers cannot escape is profitable for them.
With this knowledge in mind, there won’t be any significant drop in prices in the near future. In fact, we probably won’t ever see prices anywhere near where they were in 2019.
Based on all of the information we have right now, it looks like manufacturing of the computer chips and new cars will start to pick back up in late 2023 or 2024. This is most likely the time when new car prices will finally start to re-enter the stratosphere.
Of course, this will vary widely from manufacturer to manufacturer.
When Will Used Car Prices Drop?
Okay, so we have a couple of years to go until you can buy that new car. But what about the used ones?
As more new cars are manufactured, more folks will go back to that market, leaving used cars with room to go down in price accordingly.
The outlook for used cars is a bit better, luckily. We predict that the average price for used cars will begin to decline as soon as the end of 2022 or early 2023. In the months following October of this year, used car prices are projected to go down by 20-30%.
Is It Better to Buy a New or Used Car Right Now?
Ultimately, it is still currently cheaper to purchase a used car than a new one right now.
The price of used cars is also supposed to drop a little bit sooner than the price of new cars, as manufacturers are struggling to get back up and running.
Should You Wait to Buy a Car?
In our opinion… you should not buy a car, new or used, right now. It’s in your best interest to wait at least a year or two to let prices come back down to earth.
But we know that’s easier said than done.
So if you just cannot wait to buy a car, do what you can to find the best price. Shop around at multiple dealerships and find the best offer. Don’t just settle on the first price you’re given.
Also, consider other options like beater or rental cars.
You should also consider gap insurance. When you first finance a new car, you are usually required to get collision coverage. Gap insurance can be added on to collision or comprehensive coverage to cover the remaining cost owed on your lease or loan, should your new car get totaled.
Take a look at our overview on gap car insurance.
What to Do Instead
So what are you to do while you wait for those car prices to go down?
Try one of these solutions to make peace with your current car situation.
Refinance Your Car
One option you have that can help you save money while you wait it out on purchasing a new car is to refinance your current car.
Take a look at your interest rate on the loan payment you’re making right now. If the average interest rate has gone down, it may be time to refinance your car and save thousands on payments.
Did you buy that new car when your credit sucked but you’ve made all payments on time and you’ve improved that credit score? Look into refinancing while you wait out this insane inflation.
We don’t advise doing this if you’re nearing the end of your loan or if you’ve run up the mileage on your current car.
Get an Extended Warranty
Since you’re going to be spending a bit more time with your car, you’re going to want to make sure you’re covered, especially if your initial warranty is out.
Finding the right extended warranty for your car could save you thousands if you happen to get in an accident while you’re sticking it out with your current car.
There are plenty of options out there and most of them are cheaper and more comprehensive than purchasing an extended warranty from your original dealership, so shop around and compare to find the one that fits you.
Buyout Your Lease
If you’re currently leasing and want to avoid the insanely high prices that are sure to accompany a new lease, buying out your lease could be the best course of action for you.
If you’re at the end of your lease, you can simply purchase the car for the price listed on the terms of your lease agreement without issue. This is usually the residual price of the car that you haven’t paid for yet throughout the course of your lease.
You can do a cash buyout (exactly what it sounds like) or finance the lease buyout, whichever makes more sense for your financial situation.
You also might have the option to buy out your lease early, but check with your dealership to make sure you and your leased vehicle qualify.
