It Might Finally Be an OK Time to Buy a Car This Year
For the past couple years, buying a new or used car has been a nightmare for most people. Inventory shortages, supply-chain issues, and low trade-in values meant inflated prices and limited options for buyers. But research firm Cox Automotive reported earlier this month that new car prices and auto loan rates are projected to fall in 2024, finally offering some relief for car shoppers.
New car prices projected to drop
Due to improved supply-chain conditions, experts forecast new car prices will fall this year. “New-vehicle transaction prices are expected to decline moderately," Cox analysts said in the report. "The increase in inventory is expected to lead to higher incentives and discounts; however, we won’t see incentives at the record highs reached in 2019 when discounting exceeded 10% of transaction prices."
Plus, with demand cooling a bit, dealers may be more willing to negotiate rather than insisting on full sticker price. The huge markups that became the norm the past few years should ease up. Even lopping a few thousand off the MSRP is a win for buyers these days. And although MSRPs likely won't return to pre-pandemic levels quite yet, any reductions will help.
Hope for better interest rates
Auto loan rates are projected to remain around 7-8% APR this year, with a modest hope of them edging down. "Though the downward trend likely won’t be significant," reports Cox Automative, "any decline will help improve vehicle affordability and relieve many households struggling financially."
No matter what, try to avoid getting a long car loan, if you can. According to data from Experian, the average term for loans is nearly six years. You don't want to lock in high interest for many years that will squeeze a lot more money out of you by the end than you may realize.
Paying cash is ideal, but with reasonable financing rates on the table, it can make sense to finance part of your purchase—especially at 0% or low promotional interest offers.
Tips for buying a car this year
Even with this hopeful forecast for the market, it's still a historically tough time to buy a car. If you’re shopping around for a new or used car, it can feel there’s no light at the end of the tunnel. Still, here are some financing options that can help soften the blow these days.
Consider buying used or waiting. Pre-owned cars don’t face the same supply shortages and have depreciated substantially already. Or, if possible, try waiting out the shortages and price spikes entirely until supply rebounds.
Make a large down payment. Putting 20% or more down reduces the amount you have to finance, lowering the interest charges. Plus, it helps guard against being underwater on the loan.
Get the shortest term possible. Opt for a three- to four-year loan if you can manage the higher payments. This prevents you from getting stuck paying interest on a deflating asset for close to a decade.
Shop around for lower rates. Check rates at credit unions and local banks and negotiate hard with dealers to get the lowest possible APR. Even small differences can save thousands over the life of the loan.
The car-buying environment should improve for consumers in 2024. Follow market projections, time your purchase right, understand your budget, and negotiate hard to get the best deal possible. Move quickly if you find the right car for you—deals in this market go fast.