She had a good credit rating and enough cash for a down payment. Yet dealerships in the
“I was depressed,” Hudson said. "I was angry, too.”
A breakthrough arrived in late September, when a dealer called about a 2022 Chrysler Pacifica. At
It could have been worse. Hudson made her purchase just as the prices of both new and used vehicles have been inching down from their eye-watering record highs and more vehicles are gradually becoming available at dealerships. Hudson's van likely would have cost even more a few months ago.
Not that anyone should expect prices to fall anywhere near where they were before the pandemic recession struck in early 2020. The swift recovery from the recession left automakers short of parts and vehicles to meet demand. Price skyrocketed, and they've scarcely budged since.
Prices on new and used vehicles remain 30% to 50% above where they were when the pandemic erupted. The average used auto cost nearly
The high prices are yielding substantial profits for most automakers despite sluggish sales. On Tuesday, for example,
Still, as Hudson discovered, many vehicles are becoming slightly more affordable. Signs first emerged weeks ago in the 40-million-sales-a-year used market. As demand waned and inventories rose, prices eased from their springtime heights.
CarMax said it sold nearly 15,000 fewer vehicles last quarter than it had a year earlier. The CEO of the used-vehicle company, based in
A “buyer’s strike" is how
At AutoNation, the nation's largest dealership chain, sales of used vehicles and profit-per-vehicle both dropped last quarter. CEO
"Our analysis shows that we are coming off the high values that we saw before,” Manley told analysts Thursday.
Similarly, rental companies haven’t been able to buy many new vehicles. So eventually, they are selling fewer autos into the used market. That's crimped another source of vehicles. And because used cars aren’t sitting long on dealer lots, demand remains strong enough to prop up prices.
When auto prices first soared two years ago, lower-income buyers were elbowed out of the new-vehicle market. Eventually, many of them couldn’t afford even used autos. People with subprime credit scores (620 or below) bought only 5% of new vehicles last month, down from nearly 9% before the pandemic. That indicated that many lower-income households could no longer afford vehicles, said
Higher borrowing rates have compounded the problem. In
The 1% average drop in used prices will help financially secure buyers with solid credit scores who can qualify for lower loan rates. But for those with poor credit and lower incomes, any price drop will be wiped out by higher borrowing costs.
The new-vehicle market, by contrast, has become an option mainly for affluent buyers. Automakers are increasingly deploying scarce computer chips to make costly, loaded-out versions of pickups, SUVs and other outsize vehicles, typically with relatively low gas mileage. Last month, the average price of a new vehicle was down slightly from August but remained more than
“We can feel some pullback," he said.
Analysts generally say that with shortages of computer chips and other parts still hobbling factories, new-vehicle prices won't likely fall substantially. But further modest price drops may be likely. The availability of vehicles on
Before the pandemic, normal supply was far higher — around 4 million. So historically speaking, inventory remains tight and demand still high. Like Hudson, many buyers are still stuck paying sticker price or above.
“It's extraordinarily expensive these days,” said Jominy, who estimates that there are still 5 million
Despite recent stock market declines, many such buyers have built up wealth, especially in their homes, and are rewarding themselves with high-end autos. In the
“There's just a lot of money out there,” he said.
In its earnings report Tuesday,
Next year could be a turning point, suggested
This story has been corrected to show that 9% of new-vehicle buyers had subprime credit scores, and that has since dropped to 5%.
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