According to Kiplinger , new cars are currently being sold at 97% of the list price, on average, instead of the 102% that they were being sold at in 2022. Used car prices are also down 23% from their peak in 2022.
During the pandemic, many items, including cars, had production issues. Automakers suspended production for several weeks or months during the COVID-19 shutdown, which caused production delays and reduced inventory. When production resumed, shipping lanes became clogged, causing further delays. There were so few cars available during 2021 and 2022 that prices skyrocketed.
These issues have now mostly been resolved, which means supply and demand have mostly returned to normal. This should mean car prices will decrease as we wrap up the year.
New car models are typically released in the fall, making it a great time to buy a car. With the release of new 2025 models this fall, car dealers may offer special discounts on 2024 and 2023 models to make room for the new inventory on their lot. Because roughly 6% of dealer inventory is 2023 model cars, dealers might be desperate to sell the inventory, leading to larger discounts.
“Prices may drop due to the normal end of year cycle,” says Gretchen Seidel CFEI®, Automotive Consultant at Seidel & Co . “Dealerships sometimes will make deals on current year models to make room for new inventory, which leads to more discounts. If there is an overage in supply on a particular model, OEMs may offer incentives or rebates to customers to help dealers move their inventory as well.”
According to Cox Automotive vAuto Live Market View , 2.89 million cars were available at the beginning of June, the highest number since late 2020 and a 55% increase from a year ago. High inventory means more than enough cars for prospective buyers to keep prices low.
“There are a lot of extra cars sitting around dealer lots right now, so car companies are trying to get rid of their 2024 models to make space for the 2025 ones,” said Terry Turner, senior writer and financial wellness facilitator contributor for ConsumerNotice . “Because there are so many extra cars, the companies are offering big discounts — they averaged over $3,000 per car back in July. This should continue into the fall, meaning you will have more power to negotiate prices.”
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Interest Rates Are High
Interest rates are high right now, and that includes car loans. According to a recent Bank of America Institute report, car loan interest rates are about four percentage points higher than in April 2022.
With higher interest rates, potential car buyers don’t have as much money to spend when you factor in the cost of borrowing. This could lead sellers to lower the purchase price of cars in the hopes that more buyers can afford the cost.
“As vehicle prices level off, the high interest rates are making financing more expensive, putting pressure on dealerships to lower prices to attract buyers on a budget,” said Turner. “We might see further rate cuts in the fall season, but until then, dealerships are likely to cut prices to keep sales up, which is good news for buyers.”
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Electric Car Prices Are Decreasing
Electric car costs are getting more affordable due to faster production, increased competition, and government tax credits.
According to iSeeCars , prices on some used EV models are about 42% lower than a year ago. When deciding between a traditional gas car, a hybrid or an electric car, more people may choose an electric car if the price is low enough. More competition between cars often means lower prices all around.
Prices for used cars are down 23% from their 2022 peak. This is mostly due to the normalization of production and shipping. And while some people might not know it, the used car market can also significantly affect new car prices.
“The used car market has also seen inflated prices, they may start to stabilize as new car inventories and days supply improve,” said Seidel. “The normalization in the used market puts further pressure on prices, offering customers better deals.”
Unfortunately, prices for new and used cars are still higher than they were before the pandemic. Although they may never return to their pre-pandemic levels, this fall may be a great time to buy a car if you need one.
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