Should you buy a pricey new car now or hold off?
Pay $1,500 for suspension work on the 10-year-old Explorer or buy a new car? That used to be a no-brainer.
Now, with COVID-19 vehicle shortages, a microchip desert, supply chain dysfunction, high interest rates, and you name it, the question is fraught.
Let's get into where the auto market is now, what's next, and what to do. First — is the dam breaking on high prices and low inventory?
“It's a slow trickle,” Chicago Automobile Trade Association Co-President Jennifer Morand said. “Wholesale prices have decreased, and when we see those decrease, it means a decrease in retail will soon follow. So it's coming.”
As the pandemic dragged on, auto costs hit the roof. The average new car price is $45,625, up about 6% compared to 2021, Morand said, citing J.D. Power September data.
Plus, the average monthly car payment is a painful $708, a $52 increase from 2021.
“It's always about what the market will bear,” explained Greg Webb, a partner at Packey Webb Ford in Downers Grove.
Auto manufacturers “know that we're selling these cars for big money and they say, ‘Well, if people are willing to pay it, we're going to raise our prices,'” Webb said.
But there are still bargains out there, especially in sedans, Morand advised. “Many are under $25,000 like the Kia Forte, Hyundai Elantra, and Toyota Corolla,” she said.
Other inexpensive options are Chevrolet's Trax, a compact crossover with a starting point of $21,495, and Ford's Maverick truck, which has a $19,995 base-model price, she said.
Meanwhile, the cost of used cars began escalating in January 2021 and reached a peak of about $25,000 this February, Morand said, referring to a Cars.com analysis. In contrast, the median cost of a used vehicle was approximately $17,500 in summer 2019.
“The fact we're not selling the normal amount of new vehicles has put a huge burden on the used car market, because there just aren't any trade-ins,” Webb said.
Exacerbating the scarcity are lease holders' buying their cars and vehicle-starved rental companies outbidding competitors at auto auctions, he said.
But, Morand said, “the good news is heading into the final quarter of 2022, the U.S. new vehicle market is seeing signs of improving.”
Inventory rose by 44% at the end of the third quarter compared to the start of 2022, and the market experienced double-digit month-over-month increases for two consecutive months, the National Auto Dealers Association reported.
However, not all manufacturers are seeing the uptick.
And “if you hold off for a little while you may see some incentives — because they're coming back, which is great,” Morand recommended.
With the return of the practically extinct manufacturer's rebate, “it pretty much equalizes these increases they've had in prices,” Webb said.
Asked if consumers should hold onto their older vehicles, Webb noted that “people are forgetting if you do have a trade-in and you're paying over sticker or around sticker price, you might be paying a premium for your new car but you're also getting a premium for your used car. They even out.”
To find out more about trades-in, CATA's drivechicago.com is a useful tool, Morand said.
And if you do head to the showroom, prepare for sticker shock from interest rates. Average auto loan rates in Illinois hit 6.08% in October, according to Edmunds.com.
“It will take people a while to adjust to the fact a 3.9% interest rate is actually a pretty good rate,” Webb said.
Upcoming
Mark your calendars for Feb. 11, when the Chicago Auto Show vrooms into town with no shortage of tires to kick or test drive, Morand said. Instead of the 2022 pared-down version, both north and south halls of McCormick Place will be filled, and there will be an indoor EV test track.
You should know
Both Metra and the CTA are reaching out to young riders with seasonal trains.
The CTA is offering the Allstate Holiday Fleet with trains and buses featuring Santa, reindeer and decorations. For schedules, go to transitchicago.com/holidayfleet.
Metra is running a Holiday Train with Santa and Mrs. Claus on the Electric Line from Millennium Station to the South suburbs. Tickets are available for Dec. 10 and 17. To learn more, go to metra.com/HolidayTrain.