If you are looking to buy a new car soon you might want to hold off for a while as the cost of new cars surges, according to experts at Edmunds, an online guide to car buyers.
Doing so might fail to be an answer for some people as prices are not expected to return to normal for some time, however. Would-be buyers might have to wait for up to a year or even longer if they want to hold off until the market returns closer to the pre-pandemic levels, says Ivan Drury, Edmunds senior manager of insights.
For those who might not be able to do so and who need a vehicle soon—or have a vehicle coming off lease and the term cannot be extended—conducting additional research is essential, Drury says.
Most paid higher than sticker price
An indication of just how strongly prices are rising is shown in new figures released by Edmunds. They show that eight out of 10 car buyers paid more than the sticker price for new automobiles during January.
For example, the sticker price on Toyota cars was $37,174, but the average transaction price was $38,189—an increase of $1,015. Similarly, Kia vehicles that should sell at a retail price of $32,218 traded hands at an average $34,507—a startling $2,289 increase above the sticker price. At the higher end, Cadillacs priced at an MSRP of $76,914 sold for an average $80,962; the difference in that case was $4,048. Land Rovers changed hands at an average $90,022, an amount that was $2,565 above the $87,457 sticker price.
Not all cars sold at much higher prices. Buicks, for example, with a sticker price of $41,716 sold for an average of $41,733, only $17 more.
For the most part, however, prices were up strongly. Indeed, the number of buyers who paid above sticker price was at a record high of 82.2%, compared with only 2.8% in January 2021 and 0.3% in January 2020.
Unimaginable
The fact that most car buyers are paying more than the sticker price would have been unimaginable only a year ago, says Jessica Caldwell, executive director of insights at Edmunds.
Part of the reason is that affluent customers are willing to pay more money to obtain the vehicles that they want. Most buyers, however, are being forced to do so simply because they need a new car and have no other choice than to pay the higher prices.
Advice to buyers
Drury provides these tips for car shoppers who have to buy now:
• Be flexible.
Check out different brands, types, and colors of vehicles. You might find better deals by searching more widely. Be willing to compromise when it comes to features.
• Expand your search.
Look at places where there might be more selection and more inventory than might be available in your geographic area. Before you jump on a plane, however, make sure that you lock down as much of the deal as possible so you are not disappointed.
• Reevaluate before going directly into another lease.
It is becoming harder to find lease incentives. Specials on interest rates are still available, however. If you prefer to lease a car, use an online car lease calculator to ensure it will provide you with the value for which you are looking.
• Negotiate for more value.
If you are faced with having to pay above sticker price, try to negotiate so that the additional price you will have to pay includes all add-ons, such as service contracts, warranties, dealer-installed accessories, and protection packages.
• Leverage your current vehicle; it is your greatest asset.
The value of your car that you want to trade in is one of your best negotiating tools when it comes to offsetting the price of your next car. Use it wisely. It is a good idea to shop around for appraisals on the value of the car.
• Act quickly.
Should you find a deal that meets all your requirements, reach out immediately to your local dealer to maximize your chance of obtaining it.
