In 2024, the car buying market is poised to undergo notable changes, favoring consumers with increased vehicle inventories and more competitive pricing strategies. Economic conditions suggest slower growth but stable enough to support a healthy auto industry.
With new car prices maintaining relatively steady levels and an increased focus on electric vehicles, opportunities for buyers are expanding. Additionally, the used car market remains robust, driven by a shortage of prime certified pre-owned vehicles due to limited production in past years.
Car Prices Are Coming Back Down
Credit: Pixabay / Mohamed Hassan
It is expected that with the increased availability of cars on dealer lots, prices are expected to come down from the record highs following the COVID pandemic. It’s great news given during the past couple of years, those who were looking to purchase vehicles were faced with massive dealer markups, and that’s if you could even find the car you were looking for.
Supply and demand, we all know it.
This downward trend in prices is anticipated due to a combination of factors, including increased vehicle inventories and more aggressive discounting and incentives from dealerships as the market returns to pre-pandemic norms. Although new-vehicle transaction prices are likely to decline only slightly, the increased supply and higher incentives are contributing to more favorable conditions for buyers.
In AutoTrader’s December 2023 Price Index report, they estimate that “used car prices will be lower than those of the previous year for the first time in over 3.5 years.”
Dealerships have also moved to an online shopping experience to create more efficiency for the consumer experience. The transition to digital retailing has increased consumer satisfaction, as buyers appreciate the efficiency and reduced time spent at dealerships. Once all the paperwork is signed, dealerships can even arrange to deliver the car to your front door.
Credit: Canadian Auto Dealer
This shift has also been beneficial for dealers, who see advantages in a more streamlined purchasing process. The increase in online car buying steps includes activities like checking incentives, calculating payments, applying for credit, and finalizing prices, allowing most of the process to be conducted from the comfort of one’s home.
All of these factors point to an optimistic outlook for the automotive market in the year ahead.
Inflationary Pressures Create Additional Challenges
However, despite the benefits of model incentives and a more streamlined purchasing experience, interest rates are expected to remain high.
CNN reports that the average interest rate for a car loan is between 5.64% and 14.78% APR for a new car, and even higher for used vehicles. Cox Automotive reported that the average price for a new non-luxury car is approximately $44,052 USD, not a small amount by any means.
Credit: Pexels / Antoni Shkraba
In more recent years, higher car prices have resulted in auto loan terms being extended to 96 months.
The availability of 96-month (8-year) car loans can significantly impact both consumers and the overall car market. While these longer-term loans can lower monthly payments, making more expensive vehicles more accessible to buyers, they also come with downsides. Specifically, interest costs over the life of the loan can be substantially higher.
Furthermore, buyers may be at greater risk of becoming “upside down” on their loans, owing more than the car’s worth, particularly as the vehicle depreciates. This extended financial commitment can also limit consumer flexibility to change vehicles or respond to changing financial circumstances.
So, Who’s Going To Buy?
YouGov is a British international Internet-based market research and data analytics firm headquartered in the UK with operations in Europe, North America, the Middle East, and Asia-Pacific.
They ran an international poll of prospective car buyers to see which consumer base is the most likely to buy a new car in the next 12 months.
The answer? India and China reported the highest levels of purchasing prospects with 40% of respondents indicating they were likely to buy a car within the next year compared to only 14% of those polled in the USA and Canada.
With interest rates remaining high, some prospective buyers are choosing to hold off on car purchases as they prioritize other costs such as mortgage and day-to-day living expenses.
Toyota and Ford Continue to Dominate
So we’ve got seemingly mixed messages for the 2024 car market.
On one hand, inventory levels have stabilized but on the other hand, life has gotten way more expensive than it has in the past several years.
This has not stopped brands from seeing continued success in the market, nor has it seemed to deter car buyers.
Looking at the 2024 US auto sales figures, manufacturers such as Ford and Toyota report increased sales compared to last year, and hold an overwhelming majority of the new car sales market as shown below.
2024 year-to-date sales are up from last year for Ford and Toyota at 5.77% and 18.86%, respectively.
Other manufacturers such as Lincoln are also gaining traction, seeing a significant uplift but with considerably lower numbers in sales.
It’s Not Just The Price Of the Car
There’s a whole list of things that prospective buyers should consider when looking for a vehicle: insurance, depreciation, and financing, to name a few.
With respect to financing, it’s one thing to stretch a loan period to its max in order to afford a car (if you can call it that), but there’s also an old adage that says “if you’re buying a used car, you should make sure that you can afford the maintenance on it as if it was bought brand-new.”
Maintenance and repairs can make or break a car ownership experience. If a repair bill is beyond one’s current means and they have no other immediate sources of financing available, they may opt to get a car title loan as a last resort.
Despite access to quick cash, this does pose a risk as title loans are a short-term solution, can have high-interest rates and fees, and comes with the possibility of repossession if the borrower defaults on a car loan.
Ultimately, buyers should remain cautious and consider the bigger picture if they’re looking to buy a car in 2024.
Things are looking better, but they’re far from perfect.
