When will car inventory return to normal? America’s car dealers ended March with 1.89 million new cars in stock. That brings them close to pre-pandemic inventory levels.
As inventory builds, dealers and automakers start to offer discounts to help attract new customers. In March, the sale price of the average new car slipped below sticker price for the first time in almost two years.
When will car inventory return to normal?
Recent trends show that prices are no longer increasing as they have been. The average new-vehicle transaction price slightly decreased to $49,388 in January, a 0.6% decline from the previous month’s record high, according to Cox Automotive-owned Kelley Blue Book.
Automotive experts say prices are becoming slightly more favorable for consumers for several reasons, the first of which is due to new-vehicle supply recovery.
Although supply issues have not been substantially rectified, they are slightly better now than they were a year ago. And this is reflected by a downward shift in vehicle prices.
“What we’re seeing now is that inventory is improving on the new car side, which has been pretty bleak for some time,” says Jessica Caldwell, executive director of insights at automotive research firm Edmunds. “While new vehicles on average have been selling above MSRP since 2021, in November , the average transactions were less than the average MSRPs.”
When supply is looser, consumers are not competing for a limited number of vehicles for sale. As a result, there is potentially more wiggle room with prices, more vehicle options, more incentives with respect to interest rates and less pressure to buy as soon as possible.
In addition to the slight recovery of inventory, perhaps more impactful to the slow improvement in prices has been a decline in new-car demand from consumers. This decline is due to increased concerns about a worsening economy and the Federal Reserve’s continued interest rate hikes.
“On the demand side, prices are weaker because the cost of living is so much higher because of people’s worries about a recession,” says Caldwell.
But while car shoppers can expect a cooling off of prices, Brauer predicts that the upcoming tax season might somewhat counteract this drop and help prop prices up a little bit over the next few months. Consumers will have more cash on hand from refunds, which often leads to an increase in car buying.
Used-car prices also inching down
Used-car prices have also shown slight improvement in terms of year-over-year comparisons, although they remain significantly higher than they were pre-pandemic. Prices for the average 1-to-5-year-old car declined by 3% in December 2022 compared to the previous year, according to a recent iSeeCars.com analysis of over 1.9 million used car sales.
During the pandemic, many new car shoppers were priced out of buying new vehicles and instead were forced into the used car market, which increased demand and drove up car prices. But experts say that component of the used car market is diminishing and subsequently, pulling down used car prices.
“Many of these new customers are returning to purchasing new vehicles now that supply is slowly improving,” says Brauer. “And then a certain amount of them are maybe holding off now because of economic concerns.”
The new normal and tips for buying a car now
As prices potentially start to swing more in consumers’ favor, there may be light at the end of the freeway tunnel. But prices still remain high and unstable from a historical perspective.
“We do know that the market is getting a bit more friendlier for consumers,” says Caldwell. “Still, it’s not like it was in the glory days for auto consumers where there was more choice and dealers were likely to discount prices to be less than their competitors.”
Because inventory is still improving, she recommends being open-minded to shopping all markets including new, used and certified pre-owned vehicles.
Brauer adds that it’s important for consumers to do their research, not only by having multiple models that they feel could serve their needs but also by expanding their shopping radius as well.
“If you search only in the 30-mile radius outside your house that seems convenient, you’re greatly limiting your market,” he says. Consider using a car-buying app to find cars that are 50, 100 or even 500 miles away that may be substantially less.
Some brands still have limited supply
Foreign brands still have the lowest inventories. The highest inventories were a mix of domestic brands, dominated by Stellantis’ brands, and a mix of luxury makes.
Non-luxury brands with the lowest inventory were Toyota and Kia, under 30 days’ supply, followed by Honda, Subaru, Hyundai, Volkswagen, and Chevrolet, all with below-industry average supply. Luxury brands at the low end were Lexus, with under 30 days’ supply, followed by BMW and Land Rover.
Non-luxury brands with the highest inventory were mostly Stellantis brands, with four among the top for supply. Ram was the highest with 119 days’ supply, followed by Jeep and Chrysler. Luxury brands with the highest inventory were Buick, at 117 days’ supply, followed by Jaguar and Infiniti.
Aside from low-volume, high-performance cars, vehicles that are often popular with budget-minded Americans — subcompact cars, compact cars, and midsize cars — had the lowest supply, followed by minivans, and compact and subcompact SUVs.
Some popular models are still in thin supply, making it hard to find a discounted one.
Of the 30 best-sellers for the 30 days that ended March 27, the Kia Telluride, Subaru Crosstrek, Toyota RAV4, Toyota Camry, and Subaru Forester all had under 30 days’ supply.
Although vehicle availability is still largely dependent on the model and vehicle type, shoppers should find it easier to get their hands on some of the most popular nameplates compared to the same time in 2021. The following are inventory levels among Cars.com dealers for vehicles that make Automotive News’ most recent list of the top best-selling models.
The Ford F-150 saw inventory jump from approximately 37,500 units in November 2021 to 49,500 in November 2022 — a 32% increase; Ford Explorer inventory totaled approximately 23,000 units in November, up 47% from a year prior; Toyota Camry inventory (including the Camry Hybrid) climbed 36% to around 16,500 units; and the Toyota Tacoma is up 47% at nearly 17,000 units.
The GMC Sierra 1500 and related Chevrolet Silverado 1500 saw the most dramatic inventory improvements in the same timeframe — up to 23,500 and 56,000 units, an increase of 210% and 245%, respectively.
Inventory levels aren’t trending up for all new vehicles, however. For example, inventory for the Ram 1500 fell 8% since November 2021, and Toyota RAV4 (also including the hybrid) inventory dropped more than 7%.
Overall, Jominy said shoppers are likely to find more SUVs and pickup trucks than other vehicle types on dealer lots. He noted the best inventory remains the largest segments: three-row crossovers, compact crossovers and full-size pickups.
New-car prices continue to climb
Even as inventory levels improve, new-car prices remain elevated: J.D. Power estimates the average new-car transaction price reached a record high of $46,382 in December — a 2.5% increase from the year prior. The median price for all new vehicles among Cars.com dealers was approximately $41,000 in November, up nearly 6% from $38,800 a year prior.
For the top 10 bestselling models, median prices among Cars.com dealers are up 2%-19% from November 2021 to November 2022. The smallest price bumps belong to the Camry and RAV4 at a 2% and 3% increase, respectively.
On the other hand, full-size pickup trucks saw the highest price surges: The GMC Sierra 1500 was up 19%, while the Ford F-150, Chevrolet Silverado 1500 and Ram 1500 saw prices jump by 10%, 9% and 8%, respectively.
There’s promising news for shoppers on a budget, however: New-vehicle markups, which became more prevalent during the inventory shortage, are beginning to abate. According to Jominy, 51% of consumers paid over sticker price in November, down from 68% over the summer.
Buy now or wait?
The same question we posed in June is likely still top of mind for new-car shoppers: Should you buy a car now or wait? Jominy predicts the landscape will continue to improve in 2023.
“Things are improving slowly for consumers,” he said. “Should they buy now or wait? That’s a very subjective question specific to one’s position, but in general, prices will continue to fall modestly throughout 2023.”
Waiting does pose some risks, though. If you have a vehicle to trade in, you may get less for it in the coming months as used-vehicle prices fall. J.D. Power estimates that the average trade-in value for December was $9,316, down 3.1% from the prior year and $786 less than the peak seen in June.
Additionally, economic uncertainty and rising interest rates can present shoppers with new challenges. According to the firm, average interest rates for new-vehicle loans are expected to increase to 6.40%, which is 2.47 percentage points higher than the same time a year ago.
Shoppers who don’t want to wait (or who can’t put off a car purchase any longer) can still come out ahead, especially if they have a trade-in, notes Jominy.
“The average consumer is still getting over $9,000 of equity out of their trade, which is helping to offset record vehicle transaction prices,” he said. “There are even a smattering of incentives in the market now — primarily moderate APR deals.”
How long will the vehicle inventory shortage last?
Some chip shortages could remain through 2023 and into 2024, though supply of semiconductors and raw materials will generally improve in the auto sector. The auto sector can expect a strong year in 2023, with global car production up 3%. As semiconductor supply returns, global auto pricing should remain stable.
How long until cars are back in stock?
“Many of the components are single-sourced, so trouble at one supplier can cripple production at multiple automakers,” wrote Jominy in an email to Cars.com. Because of these ongoing challenges, production isn’t expected to return to normal until 2023 and inventory levels may not rebound until the second half of 2023.
Are car inventories getting better?
The total U.S. supply of available unsold new vehicles on dealer lots and some in transit stood at 1.89 million units at the end of March, up from a revised 1.80 million at the end of February. The end of March marked the highest level of supply since April 2021.
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