New car prices may start coming down soon, analysts say
HOUSTON - After two years of climbing car prices, automotive analysts say the market may finally be starting to turn the corner. Meantime, some buyers have been taking on $1000 monthly payments.
Auto analyst firm Edmunds says the average monthly payment for a new vehicle is now more than $700. And 14% of borrowers are paying $1,000 or more, mostly for large trucks and SUVs.
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Analysts say new car prices may finally start coming down soon, but don't expect much lower monthly payments for car loans due to high-interest rates.
JD Powers reports the average price for a new vehicle went from a record $46,259 in August, down to $45,622 in September. The average interest rate on a new car loan hit 5.7%.
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High inflation is keeping more buyers on the sidelines. Therefore, experts expect dealers to start offering more incentives.
"You’re going to see a lot of manufacturers' rebates and I do think that’s going to bring pricing down," explained Grant Feek, CEO of TRED.
When it comes to used car prices, Kelly Blue Book reports dealers saw the biggest one-month drop in prices paid at auction since the pandemic began. And on the market, used cars sold for an average of $28,061 in August, that's down 1% or $158. However, analysts expect used car prices to remain high through the end of the year.
Some drivers who purchased cars at higher prices may find themselves underwater if prices come down. And speaking of underwater, experts are warning buyers to watch out for flood-damaged cars from Hurricane Ian.
"What happens in these situations, you’ll get thousands of cars that are flooded. Dealers all over Houston and Dallas are going to be sending droves of cars to that market, which will not be good for car pricing either," said Feek.
If you need to buy a car, experts say now may be a better time to buy than when prices come down, as the Fed is expected to continue raising interest rates.
"If you’re sensitive to interest rates, you might think about buying sooner rather than later," said Feek.
Nerdwallet offers this calculator to help you determine what your car payment might be.