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Car shopping comes with rules. Rules like “the sticker price is just the starting point and negotiate down from there” and “cars are cheapest at the end of the month and end of the year.”
That rule book got thrown out in the last two years. Shoppers grew accustomed to paying more than MSRP, or the manufacturer’s suggested retail price. They watched prices rise steadily, with no cyclical drops. The end of well-established patterns leaves many car shoppers scratching their heads. The question we get most is, “When will new car prices drop?”
The answer is more than a little complicated. In some cases, new vehicle prices already started to decline. In others, they may not drop for the foreseeable future. The new world of car shopping requires an open mind and new skills.
Brian Finkelmeyer of Cox Automotive likens shopping for a new vehicle to this quote from science fiction writer William Gibson:
“The future is already here. It’s just not evenly distributed.”
Finkelmeyer is the senior director of new-vehicle solutions at Cox Automotive, the parent company to Kelley Blue Book.
In this story, we’ll explain how to navigate the new patterns of car buying and dealership pricing, so if you’re in the market to purchase a vehicle, you’ll be equipped with the best information we know from our experts. We’ll also dig deeper to answer the question about car prices dropping, even if the answer remains unclear.
Looking for a truck? Estimated supply of Ram trucks is nearly double that of Chevrolet or Ford.
Ram
What drives car prices
According to Finkelmeyer, these are the typical factors affecting the new prices of cars:
Inventory availability
Manufacturer incentives
Dealer discounts
Trade-In vehicle value
All four have seen major disruptions in the last two years.
Some brands have inventory, others don’t
In the past several years, inventory fell to record lows, driven largely by a worldwide microchip shortage. Without enough crucial microchips, which control everything from engine timing to navigation systems, automakers haven’t been able to build cars as fast as they’d like.
“Compact SUV shoppers will find discounts on the Nissan Rogue and Jeep Cherokee , but not the Toyota RAV4”
Automakers measure their stock of new cars to sell in a metric they call “days of inventory” — how long it would take them to sell out of new cars at today’s sales pace if they stopped building new ones. As recently as 2019, most of them aimed to keep six weeks (or 42 days) or more in stock. In 2022, many automakers’ inventory fell to just seven days.
Some carmakers recovered, while others did not.
“Some brands, such as Buick, Jeep, and Ram, have days’ supply ranging from 75 to 85,” Finkelmeyer says. Others still sit well under normal. “Kia
000270,
-1.02%
has a brand average days’ supply of 19.”
Check out: The cars, trucks and SUVs with the best resale value
Incentives now differ from brand to brand, lot to lot
When automakers routinely built up an oversupply of cars, they would discount them to get the vehicles off dealer lots.
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