Here’s What Usually Gets Cheaper in a Recession — And How To Take Advantage

Fears of a recession have been looming, and economist Stephanie Pomboy has been sounding the alarm that one has been coming for months.

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“There’s a lot of pain ahead of us, both for the economy and this reckoning for the markets that have been really behind the curve, like the Fed,” she said recently on the Fox News program “Mornings with Maria.”

If the U.S. is hit with a recession, higher unemployment rates could prompt people to stop spending money on things that aren’t household necessities, driving the costs of certain goods and services down . According to experts GOBankingRates spoke with, here are three things that would be cheaper and how to take advantage of the reduced prices .

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Cars

While a car is a must-have for most people, it’s also a big ticket item that Americans put off buying in an economic downturn. According to Rob Dillan, automotive expert and founder of EVhype , new vehicle sales plummeted almost 40% during the 2008 recession, and sales dropped $107 billion for new personal vehicles that year.

However, a recession could be the time to buy because dealerships don’t want to sit on inventory. They must sell cars to make money, so hefty price tags are often slashed, and prices are already cooling, Dillan said.

“As of August 2024, the typical cost of a pre-owned vehicle stood at $25,251, a decline from the peak of approximately $28,000 recorded in 2022,” he stated. “Certain industry analysts forecast that the prices of used cars may fall by as much as 14% by the end of 2024.”

Dillan explained, “The market for used EVs has also experienced a price reduction, with some models available for as little as $10,000. This trend, however, poses challenges for owners who purchase EVs at elevated prices, as their vehicles are depreciating rapidly.”

How To Take Advantage:

• End-of-year sales: Dealerships are notorious for clearing out older inventory to make room for the newest vehicles, reducing the cost of current models.
• Finance deals: “Interest rates may drop, and dealerships often offer low or even 0% financing, making new cars more affordable by reducing total loan costs,” Dillan explained.
• Cash rebates: “These direct reductions in purchase price can range from a few hundred to several thousand dollars, depending on the vehicle and timing,” said Dillan.
• Lease Offers: “Dealerships eager to move inventory may offer attractive lease deals with low monthly payments and minimal upfront costs,” Dillan stated.
• Trade-in bonuses: “Additional incentives for trading in an old vehicle can further reduce the purchase price of a new or used car,” Dillan said.

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Real Estate

Homebuyers have seen increased prices for a few years, forcing many to sit on the sidelines, but a recession could drop costs.

“For buyers, the impact can be mixed; interest rates might drop, encouraging some buyers to enter the market, but economic uncertainty related to job stability and finances might lead others to hold off,” Kimberly Misita, director of sales/sales associate with the Saritte Harel Team told GOBankingRates.

“For sellers in most markets, home prices would be expected to come down,” she added.

How To Take Advantage:

• Lower mortgage rates: The Fed might lower interest rates to help stimulate the economy during a recession, so look for lower rates.
• More negotiating power: Demand for housing can decrease, keeping houses on the market longer. Look for eager home sellers because you’ll have more bargaining power.

Travel

Vacations are typically cut from budgets and are one of the first things to go as people scale back from spending. But that doesn’t mean you have to completely deprive yourself and not enjoy a trip here and there. Traveling can actually be cheaper when there’s a recession.

“The demand for travel and hospitality services typically declines as consumers cut back on discretionary spending,” Sarib Rehman, CEO of Flipcost, said. “To attract customers, airlines, hotels and travel agencies often lower their prices and offer more promotions.”

How To Take Advantage:

• Off-season discounts: Book trips during off-peak times, when rates are lower.
• Last-minute deals: If your dates are flexible, booking at the last minute can save you money.
• Subscribe to mailing lists: “Sign up for newsletters from travel companies. They can provide access to exclusive discounts and flash sales,” Rehman said.

Is a Recession Coming?

While most experts still predict that a “soft landing” is more likely than recession, as Americans grapple with tighter budgets due to skyrocketing prices on everything from houses to groceries, many falsely believe the U.S. is already in a recession, according to a July Affirm survey reported by CNBC.

Eric Mangold, Certified Wealth Strategist, founder of Argosy Wealth Management, told GOBankingRates that this doesn’t necessarily mean the country is in a recession , but it could lead to one.

“A recession can be felt by folks in many ways, but the general slowdown of the economy is the broad feeling. Inflation hits home since a gallon of milk is more expensive today than it was a month or a year ago,” he explained.

“Inflation can be a contributing factor to a recession because if goods and services cost more, less of those goods and services can be bought by consumers, which can therefore slow the economy.”

Mangold said while it’s “impossible to predict” when a recession will hit, there are signs that help indicate when one is coming, including an increasing unemployment rate, a decrease in the number of new jobs and an inverted yield curve.

“This is when long-term interest rates are lower than short-term interest rates,” he stated. “This can mean that investors shift their investments to longer-term versus shorter-term. An inverted yield curve can suggest that the market is losing confidence in how rosy the economy looks.”

To help protect yourself during a recession, have an emergency fund for three to six months of expenses, live within your means, avoid racking up debt and explore bonds if you want to invest, Mangold suggested.

“Currently, the Treasury bond rates can be attractive, and they are viewed upon as a safe haven during tough stock market or recessionary times since they are backed by the full faith and credit of the U.S. Government,” he explained.

“Typically, during a recession, the stock markets underperform other markets like the bond markets. But many times, they have recovered and surpassed their pre-recession levels.”

This article originally appeared on GOBankingRates.com : Here’s What Usually Gets Cheaper in a Recession — And How To Take Advantage