Is 2022 a Good Time to Buy a Car?
High prices and barren dealership lots suggest it’s a terrible time to buy a new or used car. Counterpoint: Things are unlikely to get better anytime soon.
Ever since COVID-19 upended everything, new- and used-car markets have fluctuated along with the pandemic’s changing tides. Thanks to factory shutdowns and parts shortages, the supply of new cars has been unpredictable. As new vehicle inventory has dried up, shoppers have devoured the stock of used cars, too, causing an increase in prices across the automotive spectrum. In the spring of 2021, conventional wisdom said all those pressures would ease as vaccines dispatched with the pandemic, promising better deals for shoppers who could wait out the storm. But that’s not the future we’re living.
High Prices and Car Shortages Won’t Disappear Overnight
The predicted recovery was stymied by factors ranging from bad weather to renewed virus outbreaks, so we went to the experts; do they think 2022 is a good time to buy a car? Tyson Jominy, vice president of data and analytics at J.D. Power, says we shouldn’t expect new-car inventories to start to increase until late 2022. J.D. Power also estimates upwards of 5 million purchases have been postponed, so even as cars begin to roll off manufacturing lines faster, they’ll be snapped up just as quickly by eager shoppers. And car companies likely won’t resume using incentives to sweeten the deal for would-be buyers until at least early 2023.
That means the big price hikes we’ve seen—average new car transaction prices are up about $10,000 compared with 2019, and used car prices were
Silver Linings in a Cloudy Market
Not every change wrought by the pandemic has been bad news for prospective shoppers. While soaring used car prices are bad for those who can’t afford a new car, they may mean 2022 is a good time to buy a car for those with a vehicle to trade in. A high trade-in price means added capital that can help reduce the finance share of purchasing a new car. Along with pandemic-induced low-interest rates, a higher down payment can help keep monthly car notes low even if the total cost of a new vehicle is higher than it might have been in 2019. Credit reporting agency Experian says the size of the average new car loan in the second quarter of 2021 compared against 2020, dropped from $36,121 to $35,163.
In the past, buying a car meant hours in a dealership going over papers, waiting for credit approval, or engaging in intimidating (for some) face-to-face negotiations. But now,
Chronically low inventory has changed the expectation that you can walk into a dealership on a Friday afternoon and leave with a new car in time for a weekend road trip. But for glass-half-full types, that may be a blessing, too.
Jominy says it’s now more common for buyers with flexible schedules to work with dealers to custom-order their new cars. For example, Ford plans to move to an order-based system where customers order a vehicle online from the factory and wait six to eight weeks for their new car to arrive at a dealer. It means a longer wait, but few or no compromises, and no risk that a vehicle you test drove in the morning will be sold out from under you by the afternoon.
How Long Are You Willing to Wait?
The sum of these circumstances adds up to a car market that looks wildly different than it did pre-pandemic, and one less welcoming to prospective buyers. But despite last spring’s sunny predictions, the supply and demand dynamics that have driven price increases will likely take years to sort out. And even the new, less-optimistic projections for a return to normal should be taken with a grain of salt.
The trajectory of the pandemic is still uncertain, and, like it or not, COVID-19 is plaguing the global supply chain as surely as it’s disrupting your travel plans. Is 2022 a good time to buy a car? It’s hard to say, but if you find yourself needing or wanting a new or used vehicle, it might be time to stop waiting and start shopping.