Matthew Oliver
Back in 2022, the cost of buying a new (or even a used) car was higher than any of us wanted to see. The average cost of a car in December 2022 was $49,918. But thankfully, prices are going in the right downward direction. Though we’re still hovering around $47,244 as of February 2024, we’re on the right path.
But what causes these car price fluctuations in the first place? And, how can we make sure we get the best price on a car, when we can’t wait for prices to drop further? The team at RateWorks has the inside scoop.
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Why Have Car Prices Fluctuated So Much in Recent Years?
Car prices have changed significantly in recent years for a few big reasons. First, the COVID-19 pandemic made it hard to make silicon (semiconductor) chips, which are a big part of cars. You’ll find anywhere from 1,000 to 3,000 chips in a new car rolling off a lot today. That’s a lot of chips!
And because there weren't enough chips, fewer cars could be made. This meant fewer cars were available to buy, so prices went up. But the problems didn’t stop there.
Also, problems with shipping goods worldwide, workers striking, and changing interest rates have affected car prices. But, really, it's all about supply and demand. When there are fewer cars to buy, prices go up. When there are more cars, prices can go down.
When Will Car Prices Return to Normal?
Consider that in February 2018, just over six years ago, the average new car price was $36,221. That’s an increase of almost $2,000 per year. So, when we try to answer the question of when car prices will return to normal, it begs the question of what normal is now.
Even though inflation is slowing down, car repairs still cost a lot more. The Bureau of Labor Statistics reports fixing a car is 17% more expensive than last year. Car insurance isn't cheap, either. It's gone up by 19% in the past year. Insurance rates have soared With more crashes, parts being hard to find, cars costing more, and repairs being pricier. Now, worrying about car costs is a big deal for many people.
So, if you're considering buying a car in 2024, plan ahead. You might need extra money for repairs and insurance. Also, shopping around for insurance could save you some cash. Prices might be dropping, but the overall cost of owning a car is still going up.
Tips for Saving Money When Buying a Car
This all begs the question, what do you do when you need to buy a car now and can’t wait for prices to come back down? The first answer is to understand that, in reality, we won’t see those prices we saw just six years ago. Inflation alone is going to drive car costs up, to the tune of about 3.2% each year.
This said, if you need a new (or used) car to get back and forth to work and anywhere else you need to get to, there are some things you can do to save some money.
- Compare prices online first. Look at different websites to find the best deals on the car you want.
- Consider buying used. A used car can be much cheaper and still in good shape.
- Negotiate the price. Don't be afraid to bargain with the seller to get a lower price.
- Pay in cash if you can. Avoiding a loan saves you from paying interest.
- Check for discounts. Some dealers offer discounts for things like recent graduation or military service.
Decided Now is Not the Time to Buy? Consider Refinancing with RateWorks
It may be worth considering a refinance if you can hold off on buying a new or used car but want to save on monthly expenses. You can refinance your car at any time, and there are so many benefits to doing so, such as:
- Lower monthly payments. Refinancing can reduce what you pay each month.
- Get a better interest rate. If rates have dropped, refinancing can save you money.
- Pay off your car loan faster. With a lower rate, more of your payment goes to the principal.
- Save money for car repairs. The savings can help pay for upkeep, making your car last longer.
- Improve your cash flow. Extra money each month can be used for other important things.
Interest rates are beginning to drop. They currently range from 5.64% to 21.55%, depending on your credit score. So, just how much can you save? Get a free quote from RateWorks today.
