Buying a New Car Will Finally Be Cheaper This Year
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New car prices and auto loan rates are projected to fall in 2024 as market conditions improve for buyers.
Cox Automotive, a research and consulting firm, forecasts that the supply of new cars will finally return to normal levels this year. New vehicle inventory is expected to rise to nearly 3 million units, which would be three times the level of just under 1 million in late 2021 at the height of the chip shortage.
The increased supply should put an end to a historically rough period for car buyers. Going forward, car shoppers can expect dealerships to offer more reasonable prices and manufacturers to improve incentives like rebates and financing deals.
“New-vehicle transaction prices are expected to decline moderately," Cox analysts said in a report Wednesday. "The increase in inventory is expected to lead to higher incentives and discounts; however, we won’t see incentives at the record highs reached in 2019 when discounting exceeded 10% of transaction prices."
Auto loan rates are also expected to ease somewhat this year, Cox forecasts. Amid easing inflation and the possibility of interest rate cuts from the Federal Reserve, car buyers should find better financing deals. (This trend is already being observed in the mortgage market.)
While the extent of the potential drop in auto loan rates is hard to predict, Cox reports that “any decline will help improve vehicle affordability and relieve many households struggling financially.”
New car prices will likely fall in 2024
A separate report from Edmunds on Wednesday found early signs of improvement in auto loan financing conditions. The firm's data shows an increase in low-interest-rate loans with longer terms in the past six month. Financing conditions improved most noticeably in December as manufacturers improved incentives to attract car shoppers.
“Most consumers are looking for low APRs with longer loan terms, so the growth in those loans is helpful to lure consumers who have been sitting out," Jessica Caldwell, head of insights at Edmunds, said in the report.
The average term length for loans with sub-4% APRs increased to 56 months in December, up from 50 months in June.
And while 0% APR deals are still uncommon, their share of the loan market more than doubled recently, from 1.1% in the third quarter to 2.3% in the fourth quarter.
Bottom line: Is it a good time to buy a car?
It remains a difficult time to afford a new vehicle. Average monthly payments reached a new record high of $739 in the fourth quarter of 2023, and the average down payment hit an all-time high above $7,000, according to Edmunds. And the average auto loan rate for a new car is 7.4%, nearly a full percentage point higher than a year ago.
But the good news is that market trends look promising for car buyers. With vehicle supply and financing options likely to improve, Cox concludes that "2024 will be the best year for car buyers since the pandemic."
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