Is now a good time to buy a car? Prices for new vehicles in July saw slight increases as inventories bulked up, according to data from Kelley Blue Book parent Cox Automotive. Dealers and automakers offered discounts, known as incentives in the lingo of car shopping.

For shoppers wanting to purchase a used vehicle, trends improved some (more on that in a moment). For the first time in a long time, we can tell you that taking your time to shop for the right car this month might actually let prices drop. Used car prices dipped, which helped consumers find better deals.

Is Now a Good Time to Buy a Car?

For car owners wondering if now’s the time to trade in, that will depend on how much money they’re willing to spend.

“It’s almost always the case, certain vehicles aside, that holding off and performing repairs will be cheaper than purchasing a vehicle,” said Ivan Drury, director of insights for Edmunds. “You’re going to spend a lot more in just one year of payments, or even your down payment, than it will be for a major repair.”

At the same time, dealers are still looking to boost their inventory, which means trade-in values are still “extremely high,” Drury said.

“Dealers legitimately do still want to buy used inventory,” he said. “If you have something that’s relatively new, you still have an asset on your hand and something that they can resell rather quickly that they’re going to want.”

What New Car Shoppers Can Expect

The average new car buyer paid $48,334 in July. That’s $337, or 0.7% more, than June’s total. When compared with July 2022, it’s $199, or 0.4% more, and the smallest year-over-year increase in a decade. More remarkable, it’s $1,335, or 2.7% lower, than the start of the year. That total shows the largest January-to-July price tumble in a decade.

“New-vehicle price inflation has all but disappeared in 2023,” said Rebecca Rydzewski, research manager at Cox Automotive.

“New-vehicle prices, primarily driven by cuts in luxury and electric vehicles, are decreasing as inventory is steadily improving. With higher inventories and higher incentives helping to keep downward pressure on prices, there certainly are good reasons for shoppers to be heading back into the market.”

Depending on the model you’re shopping for, dealers may even be overstocked.

Car dealers measure their supply of new cars for sale in a metric they call “days of inventory,” or how long it would take to sell out of cars at today’s sales pace if they couldn’t acquire more. At the end of July, dealers had an average 56-day supply of all vehicles. But Ram, Jeep, Chrysler, and Dodge all sat on supply levels over 80 days.

Dealers also average more than a 100-day supply of electric vehicles (EVs). The price of the average electric car fell more than 20% in just one year.

Americans continue to buy more luxury cars than the historical norm. The luxury share of the U.S. market was 19.3% last month — near a record high. The average luxury buyer paid $63,552 in July, almost 3% less than a year ago.

What Used Car Shoppers Can Expect

The average used car in America sold for $27,028 in July, down 0.5% from the month earlier’s price. It’s 4.1% lower compared to July 2022.

Wholesale prices have fallen further than that. Dealers paid 11.6% less for the average used car at auction in July than they did a year ago. When wholesale prices drop, retail prices usually follow about six to eight weeks later. However, they aren’t dropping as sharply this summer because of the lingering effects of the last several years.

Waves that hit the new car market reach the used car market years later. All those factory closures early in the COVID-19 pandemic, the microchip and other supply shortages, and Americans buying their cars at the end of their leases mean more than 8 million fewer used cars reaching the market for the next few years.

That means sustained price drops won’t be coming for some time. But prices are falling. Taking your time to find the right used car doesn’t mean much risk of prices increasing this month.

An Update on Supply-Chain Problems

A worldwide shortage of microchips drove car prices higher for much of the last two years. As it eases, some automakers and dealer groups plan to keep the supply of cars low, allowing them to charge more for cars. The days of dealer stockpiles and hefty discounts may never fully return.

Even as automakers increase their supply, other threats loom. The United Auto Workers union and America’s Big Three automakers recently started negotiations over new labor contracts. Many analysts believe any agreement won’t come without a strike that shuts down some factories in the fall.

Pre-pandemic, Americans routinely bought more than 17 million new cars per year. In 2021, we bought just over 15 million. Last year, shoppers purchased close to 13.7 million new vehicles. In 2023, Cox Automotive predicts Americans will buy 15 million new vehicles.

Automakers Are Building More Expensive Cars

Though short-term trends are pushing new car prices down, automakers are focusing their efforts on building more premium cars. The era of the inexpensive car is disappearing.

A recent analysis finds that sales of cars priced at $25,000 or less have fallen by 78% in just five years. Five years ago, automakers offered 36 different new models in that price range. This year, they offer just 10.

Meanwhile, those priced at $60,000 or higher have grown by 163% in the same period.

Cox Automotive Chief Economist Jonathan Smoke explains that lenders are more likely to loan money to affluent car shoppers with all the recent Federal Reserve interest rate hikes. “This trend induces automakers to focus on profitable products for consumers who can afford to buy, which keeps less affluent consumers out of the new-vehicle market altogether and limits what is available and possible in the used market for years to come,” Smoke cautions.

Older, Less Expensive Cars Harder To Find

If you hope to find an older vehicle and your budget is less than $15,000, these cars remain in short supply. More would-be new car shoppers started buying up the available used cars. So, the shortage of lower-priced cars is partly due to a lack of inventory.

Plus, Americans are holding onto their cars longer than ever. The average car on American roads is now 12.5 years old. Automakers also produced fewer cars for several years after the 2008 recession. That leaves fewer higher-mileage, older used vehicles available to sell.

The easiest used cars to find are priced between $15,000 and $30,000. Cars priced under $15,000 remain difficult to find.

How To Buy a Car Right Now?

If you want to purchase a new or used vehicle, be prepared for sticker shock. For new vehicles, prices remain 27% higher than during the early days of the pandemic. But take stock that your next car will likely last longer and help you drive safer than ever with all the technological advances and offerings.

Vehicle quality studies repeatedly show that today’s new cars suffer fewer problems than those from just a few years before. That means buyers of higher-priced used cars will likely see the vehicle driving on the road even longer. The same goes for those buying new ones.

With most automakers now building such durable cars, they compete by adding more high-tech features. Features like adaptive cruise control and Apple CarPlay are now more common than ever on entry-level vehicles. Read on to see our tips on buying a car below.

Tips for Buying a Vehicle Right Now

If you must shop right now, we recommend a few strategies to help you find the right new or used car that fits your budget.

• Expand your search. Widen your search to a broader geographic area.
• Stay patient. Call dealerships early and often to see what’s coming off the trucks for those harder-to-find vehicles. Leave a refundable deposit if you want first dibs.
• Understand the timing. Be prepared to shop for several weeks, and know it involves calling or visiting several dealerships as you look for the right fit.
• Don’t jump. Shop around your trade-in as aggressively as you seek out the right car. Don’t accept the first offer. You could sell yourself short.
• Weigh your options. Don’t just look for a car; search for the best interest rates from banks or credit unions. Then, weigh all your options, including financing incentives at the dealership, if that’s where you buy your next vehicle. Also, you may find the price differences of some newer model used vehicles are almost the same as new cars. Just keep all your options open during your search.
• Don’t pay dealer markups. If you see a markup, sometimes called a market adjustment, on your final invoice, ask that it be removed or shop at another dealership.

FAQs

Is December a good time to buy a car?

Yes. December has the highest discounts from the manufacturer’s suggested retail price (MSRP) for both new and used cars, according to Edmunds transaction data. However, if you need a car in March, we don’t recommend waiting for the entire year. There are great deals out there regardless of the time of year.

Is January a good month to buy a car?

Not if you’re looking for a significant discount. January marks a new year for sales, and after the aggressive discounts seen in December, dealers tend to start the year conservatively. The first few months of the year offer the smallest discounts off MSRP.

How do I get the best deal on a new car?

You can get the best deal on a car by knowing what the market value is and comparing it to offers you’ve solicited from dealers in your area. That said, there are many aspects to a “good deal” beyond the selling price of the vehicle. The terms of the loan, the trade-in offer, and the way you are treated all contribute to what we consider a good deal.

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