While you may already be dreaming of the vehicle brand and model you want and the auto detailing services you will go for this year, check out the analysts’ pricing forecasts first. You will want to know whether that car, van, or truck will be affordable for your budget.
Predictions for Higher New Vehicle Prices
According to Reuters, J.D. Power and LMC Automotive predict that new vehicle prices will soar at the start of 2022 due to high demand and worldwide inflation. Supply chain issues and Covid-19 Omicron will, however, reduce manufacturing capacities. With low inventory, sales will dip.
CNBC cites J.D. Power’s head of data and analytics stating that new vehicles prices will increase throughout 2022. He said 89 percent of buyers are paying much more than the manufacturer’s suggested retail price (MSRP) or about five percent over it. Edmunds’ data shows that the current average MSRP for a new car is $45,209, while the current average price is $45,872. Car and Driver quotes a higher average new car price from Kelley Blue Book as of December 2021, at $47,077.
CBS News also said vehicle prices would continue to rise due to consumer demand and inflation. Potential buyers will have a limited inventory to choose from, with markups and no discounts from dealers and high competition from other buyers.
CNN Business cites Cox Automotive’s chief economist predicting that the average price of new vehicles will continue to rise, possibly even at a rate faster than inflation. This is because many consumers prefer high-end vehicles that have more safety features, as well as sport-utility vehicles (SUV) and trucks.
CBS suggests searching wide across dealerships to find the best price. According to Edmunds, the MSRP is often the lowest price there is. If you find what you are looking for, lock it in before another buyer snatches it up.
J.D. Powers recommends ordering a car from a dealership despite a wait of four to eight weeks. To lock in sales, automobile manufacturers are offering incentives for pre-orders that are not given to people buying from dealers’ stocks. Furthermore, ordering enables you to specify your preferences in color and trim.
Predictions for Higher Used Vehicle Prices
CBS News cites the prediction of Edmunds analysts that, for the first time, the average price of used vehicles will be more than $30,000. Prices of used cars that are one to three years old will be almost equal to, or even more than, their brand-new prices. This is because they may not be available brand-new.
CNBC cites data from Edmunds showing that the average price of a used car is 27.9 percent higher than in January 2021. The prices range from $14,124 for a nine-year-old car to as high as $30,334 for a three-year-old car.
Ironically, according to CBS News, the high prices of used vehicles drove inflation upward in 2021 to seven percent. That inflation is then driving prices higher today. It is, therefore, an unfortunate spiral. CBS News notes, however, that this also increases trade-in values for used vehicles. This becomes a plus if you are trading in your current vehicle for another used car of a newer model.
It is also better to go for a used vehicle that is certified and has a warranty. The price will be even higher, but it will be in better condition, and you can get your interest rate subsidized.
Many buyers may have to pass, though. TrueCar predicts that the sales of used vehicles will decrease by two percent from December 2021 to January 2022 and nine percent from January 2021.
Predictions for Lower New Vehicle Prices
On the other end of the opinion scale, MarketWatch cites TrueCar’s forecast that the average price of new vehicles will decrease by two percent from December 2021 to January 2022, breaking the upward trend of nine consecutive months. Compared to January 2021, though, it will still reflect an increase of 16 percent.
Predictions for Lower Used Vehicle Prices
According to CNN Business, J.D. Power predicts that from December 2021 to December 2022, the average price of used cars will decrease by nine percent. The downward trend will continue through 2023 but will not reach pre-pandemic levels. The founder of the car buying app CoPilot stated that there are already indications of a decline in used car prices, predicting that it can go as low as 10 percent above pre-pandemic prices.
Business Insider states that Cox Automotive’s chief economist believes that the decrease will be more modest than that. He believes that used car prices will only start to go down in the second half of this year and only reach a decrease of three percent by the end of 2022.
It is always better to err on the side of caution. It may be risky to purchase a used vehicle at a very high price if there is a possibility that prices will dive by year’s end. Study your options among the lower-priced new cars, or hold on to your current vehicle a while longer.