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304 North Cardinal St.
Dorchester Center, MA 02124
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There’s nothing quite like the thrill of buying a car, especially if it’s brand new. Over the past few years, however, carmakers have faced the pandemic and several other major challenges that threw the industry for a loop. While some of those issues have improved, car buyers aren’t out of the woods quite yet.
Let’s go over the current trends in market prices, interest rates, and other factors so you can decide whether buying a car in 2024 is the right move. Here’s what you need to know.
The pandemic created global supply chain issues that impacted several industries, including car manufacturers. As new car inventory tightened, a spike in demand for used cars caused runaway price increases in 2020 and 2021.
As new car inventory recovered, used car prices have come down nearly 13% from their high in January 2022, according to the Federal Reserve Bank of St. Louis. However, they still remain roughly 34% higher than pre-pandemic levels recorded at the end of 2019. Part of the reason for the pricing resistance is limited inventory, particularly among the most affordable vehicles.
However, the Manheim Used Vehicle Value Index, which tracks the prices dealers pay for used cars at auction—and typically translates to retail prices in the following months—continues to show a downward trend.
But while it’s reasonable to expect used car prices to continue to decrease in 2024, your options may be limited to more expensive models.
New car inventory plummeted in 2021, primarily due to computer chip shortages. With demand outpacing supply by a wide margin, new car prices surged. In April 2023, average prices were 19% higher than they were two years before, according to the Federal Reserve Bank of St. Louis.
Since then, prices have leveled off, and inventory has somewhat recovered, reaching a two-year high in November 2023, according to Cox Automotive. However, the total inventory of 2.4 million vehicles remains nearly 30% lower than 2019 levels.
As new car inventory continues to recover, new car prices may start to cool. But some experts warn not to expect significant drops in 2024.
The Federal Reserve has taken an aggressive approach to combating high inflation rates triggered by the pandemic, hiking its federal funds rate 11 times since March 2022. The rate impacts the prime rate used by lenders to determine interest rates for different types of short-term loans, including auto loans.
As a result, auto loan interest rates have increased drastically. According to Experian’s State of the Automotive Finance Market for the third quarter of 2023, the average interest rate for new car loans was 7.03%, compared with 4.09% in 2021. For used cars, the average loan interest rate was 11.35%, up from 8.06% two years previously.
The good news is that the inflation rate has started to come down, having reached its lowest level in more than two years in October 2023. While the future remains uncertain, top economists from 14 of the largest banks in North America expect inflation to approach the Fed’s target rate in 2024, resulting in the federal agency cutting its rate by 1% by the end of the year.
In other words, financing a car, either new or used, may get less expensive next year, but not by much.
If you have the luxury of waiting to buy your next vehicle, there are certain times of the year when you’re more likely to get a deal. Some of the best times to buy a car include:
That said, some car purchases may be more urgent than others. If you’re dealing with a car that’s constantly breaking down and you need a more reliable form of transportation for work or school, the best time to buy a car is now.
The process of buying a car can take some time, especially if you want to maximize your savings. Here are some steps to get started:
If you’re thinking about buying a new car in 2024, understanding auto industry trends can help give you more context for what to expect. Regardless of when you decide to purchase a car, monitoring your credit regularly can give you the information you need to build and maintain a solid credit history, making it easier to save money on an auto loan.
In addition to comparing auto loans, it’s also a good idea to shop around and compare auto insurance coverage and costs to ensure you’re saving as much money as possible on your next car.
At O1ne Mortgage, we understand that buying a car is a significant financial decision. If you’re looking to finance your next vehicle or need assistance with any mortgage services, we’re here to help. Call us today at 213-732-3074 to speak with one of our experienced loan officers. Let us help you navigate the complexities of auto financing and find the best solution for your needs.
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