How Will Your Car Costs Change in 2024?
As the auto industry continues to react to numerous economic changes, new-car buyers may want to get a feel for 2024's trends.
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As the U.S. economy continues to recover from the slower growth of 2022 and 2023, car buyers could see sticker prices come down in 2024. But, while those manufacturer-suggested retail prices might be easier to swallow, borrowers are likely to continue seeing high loan rates for both new and used vehicles in the new year.
Auto Trends Affecting Car Prices in 2024
For 2024, the consumer outlook for the auto industry appears largely optimistic, though a few setbacks could give car buyers pause.
Inflation is finally showing signs of tapering off after months of price jumps, with the U.S. Bureau of Labor Statistics (BLS) in January reporting that many consumer price indexes held steady in the final months of 2023. Buyers are starting to see better prices across the board, including in the auto industry.
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Manufacturers are also adjusting to the economic demand for "smart" vehicles, which are advanced vehicles that use microprocessors to help with navigation, cruise control, and other automated features. While these sophisticated systems require more elaborate parts to run effectively, some economists are optimistic about widespread investment in domestic manufacturing of smart-car parts that could increase the U.S. market share of memory chip production from 2% to 10% over the next decade. This may create less reliance on international supply chains, which could mean more affordable cars for consumers in the near future.
Auto Trends Affecting Car-Ownership Costs in 2024
On top of these potential drops in car-purchasing costs, consumer dollars could go further when making financial decisions at the pump as well. Year-over-year average gas prices dropped 5.6% between October 2022 and 2023,
However, these savings may be offset by a sharp rise in vehicle insurance costs, which have increased 19.2% during the same timeframe. For context, if someone paid $2,000 in October 2022 for their annual insurance premium, the 19.2% jump would push that payment to $2,384 in October 2023.
Auto Loan Rate Forecast for 2024
Despite overall car prices seeming more within reach for the average consumer in 2024, loan rates for borrowers may not become any more affordable. Loan rates currently sit at a nearly 20-year high,
Loan rates have trended consistently higher since September 2021 — a change of more than 3% that mostly impacts low-credit borrowers. But some good news could be on the horizon, as the Federal Reserve suggests a possible interest rate cut to 2% could come as soon as the spring if inflation continues to trend downward. While Fed rates don’t directly impact auto loan rates, changes to the rates often have a trickle down effect, leading to lower loan rate offerings by lenders.
Therefore, if the Fed's prediction holds true...relief over the next six months. You can monitor the Fed rates and reach out to your preferred lenders to confirm any resulting impacts to loan interest rates. While industry forecasts for 2024 seem optimistic compared to the past few years of volatility, time will tell which of these trends plays out to decrease or increase car costs.
