Shoppers looking for new or used cars are seemingly on a “buyers strike” even as auto prices start to lower. Here’s what’s behind this strike and what’s driving car prices lower.
Dealers Seeing a Buyers Strike as Car Prices Stabilize
If you’ve been looking to get into a new or used car, you’ve probably noticed the down-tick in car prices over the past couple of months. While these lower prices are certainly welcomed by many drivers, it’s still not enough for others. According to Adam Jones, an analyst at Morgan Stanley, shoppers are responding to the current automotive climate with a “buyer’s strike.” Despite the lower cost, many are waiting a little longer to pull the trigger on shopping for new or used cars. Here’s what you need to know as you shop for your next vehicle
Inventory Loosens, Prices Respond
During the pandemic, kinks in the supply chain, a pause in auto parts production, and global lockdowns created the perfect storm for an automotive disaster. These abnormal conditions created a tight inventory that helped drive prices to all-time highs.
With fewer new vehicles being pushed into production, new vehicle markets saw consumers willing to pay significantly higher than MSRP pricing. For many shoppers, these high prices pushed them into the more affordable used car space. Even then, this surge in used vehicle demand eventually led to higher prices in the used car market as well.
As we move away from the conditions that led to this automotive disaster, inventory has begun to loosen up, helping to alleviate some of these sky-high prices. Despite this, new and used vehicles remain to be anywhere from 30% to 50% higher than they were pre-pandemic. For many shoppers, these price points are still too high, prompting the “buyer’s strike” we’re seeing today.
Woes of Recession Keep Buyers Away
Buyers are also waiting on the sidelines because of fears of an inevitable recession. High inflation has pushed many to dig deeper into their pockets for everyday necessities. Uncertainty about the nation’s economy and the price of everyday bills like shelter and groceries has left auto buyers debating whether or not it’s the right time to get into a new or used vehicle.
Auto Market Responds to Higher Rates
While supply in the automotive market is slowly starting to stabilize, higher interest rates have left more cars on the lot than usual. With the Fed’s recent announcement of raising rates again, many people simply can’t afford to finance a new or used car even if the price is lower than this time last year.
Auto lenders are also on the edge as many borrowers are choosing to default on their loans simply because their loan is worth more than their vehicle.
Buyers Hold Off as Auto Market Stabilizes
With uncertainty about the economy and still high prices for new and used cars, consumers are likely to continue holding off on their new vehicle purchases. While it’s unclear when prices will flatten and offer consumers that much-needed relief, one thing is clear — consumers have shown that they don’t mind waiting until auto prices deflate.
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