Jonathan and Nicole Helali have been putting off buying a new car because of high prices. But with a baby arriving in a few weeks, they’re making the rounds of local car dealers – and are hopeful they’ll get a good deal.
“I feel like the ball is more in our court now, compared to like a few months ago, when it was more in their court,” Jonathan says.
He’s right. Up to a point.
During the pandemic, chip shortages and inventory issues caused prices of new and used vehicles to skyrocket. That’s finally changing.
“Throughout most of last year, almost everybody was paying above MSRP,” says Ivan Drury, director of insights for Edmund’s. “The last two months of 2022, we saw consumers finally start to break and get that below MSRP deal that they’re accustomed to.”
But we’re not out of the woods. Used-vehicle prices rose 2.5% in January from the previous month – the largest monthly increase since 2021. And borrowing costs are at the highest level in years thanks to a series of interest rate hikes.
“If you’re a consumer and you’re thinking, oh, I’m going to do some wheeling and dealing, I’m going to get them way below sticker, that’s probably not going to be the case,” says Matt Degen, senior editor of Kelley Blue Book.
The rule of thumb is to always do your homework before buying a vehicle. That’s even more important at a time when the market remains in flux. Start with financing.
“Remember, you’re not just looking for the best deal on a car,” Degen says. “You’re looking for the best deal on the loan. So you know, go to your bank, go to your credit union, see what they can do, get preapproved.”
The average price for a new car is $50,000. That’s a big chunk of change – up 30% since 2019. Certified pre-owned cars can be a smart compromise between new and used.
Many Californians like the hassle-free convenience of leasing. But the shortage of new cars in recent years has cut into availability.
“You’re starting to see some lease deals reappear, especially in the L.A. region, especially when it comes to luxury vehicles,” says Drury. “But they’re not as prevalent as they used to be.”
Electric or gas is a question all local buyers are asking. By 2035, new vehicles sold in California will have to be electric. So we’re in a transitional phase that’s starting to see EV prices gradually coming down and new models appearing.
But don’t rush. Every expert I spoke with said the car market will remain tight for at least another year. So if you don’t need new wheels right now, like the Helalis, maybe you just want to wait.