Many Americans have put off buying a new sport utility vehicle or truck because of steep prices and high interest rates.
Now, however, may be the right time to upgrade that older model, industry watchers say.
"2024 is probably the best year since the pandemic to buy a new car," Mark Schirmer, director of industry insights at Cox Automotive, told ABC News. "2021 and 2022 were really difficult years. Dealers are talking about discounts again ... this was not happening 18 months ago. The shelves are full and there are more selections now."
The pandemic supply crunch has largely been resolved, Schirmer noted, and deals on new vehicles are getting better -- leading to higher customer satisfaction with the car-buying process.
Interest rates are still historically high -- the average APY was 9.2% in December -- but they've fallen from last fall's peak, Schirmer said. Prior to the pandemic, interest rates for new vehicles ranged from 4% to 5%.
"As interest rates come down and discounts increase, some people who have been pushed out of the market may come back," Schirmer said. "What we're seeing now is a more normal market."
Of course, it may be tough to score a discount on the hottest and latest models. The brands that have excess inventory on lots and are more likely to lower prices are Ford, General Motors and Stellantis, according to Schirmer.
John Lawler, Ford's chief financial officer, said in November that the automaker was closely monitoring prices and would likely offer deep incentives to woo shoppers.
Consumers are also asking: Will the days of 0% financing on new models return?
"Never say never," according to Nish*t Madlani, a managing director at S&P Global Ratings, who added that he expects the level of incentives to rise in 2025. "With inventory going up, we've shifted to a buyer's market," he said.
Madlani blamed elevated vehicle prices on fleet sales and Americans' preference for gargantuan trucks and SUVs.
"The market is 80% trucks now and 20% sedans ... people are willing to pay up for larger vehicles," he said. "Auto sales have been resilient."
Jessica Caldwell, head of insights for Edmunds, said drivers expect -- and demand -- more amenities in their vehicles, which can quickly increase the MSRP. The average transaction price of a new vehicle was nearly $49,000 in December, according to Edmunds data.
Moreover, hybrids and vehicles with big, V8 engines are also seeing huge interest from consumers and are selling at or above their sticker price.
Many Americans who are strapped for cash still cannot afford to finance luxury priced vehicles, she said.
"Prices are getting softer ... but we're seeing demand at the lower end of the market, at the price points people can afford," Caldwell explained.
Low interest rates are available to consumers, she pointed out, but getting one often requires paying off the loan in less than four years.
"People can't afford to pay a car off in 48 months," she said, adding that "very few Americans buy cars in cash."
Madlani, though optimistic about new vehicle sales, said a reversal in the economy and stubbornly high rates could cause consumers to become delinquent on their auto loans.
"We're already seeing a higher level of younger people defaulting on loans," he said.
The best deals right now may be on electric vehicles, with an influx of models and slower pace of adoption among drivers. The number of incentives on EVs is higher than the industry average and consumers can save up to 9% on the vehicle's price, according to Cox Automotive data.
"The EV market is extremely competitive and there will be very intense pricing pressure for all players," Madlani said.
Added Caldwell: "A lot of Americans are still not interested in making the switch to an electric vehicle. There needs to be more price slashing on EVs to get Americans to buy them."
FAQs
Experts say that 2024 will be the best year to purchase a new car since 2019. As interest rates slowly drop throughout the remainder of the year, payments will become more manageable. Don't overlook manufacturer rate promotions, as they can save you thousands of dollars.
How will the car market be in 2024? ›
At the end of 2023, most experts predicted that car prices would continue to fall slightly in 20242. They also expected new car production to increase in 2024, leading to lower prices for new and used vehicles.
What is the best moment of the year to buy a car? ›
The best time of year to buy a car is towards the end of December, especially if you want a new vehicle. If you aren't able to go car shopping at the end of December, May is another good option. Unlike in wintertime, you'll have a large stock of departing models to choose from.
Why is a truck better then a car? ›
Power and Towing Capacity
The powerful engines of trucks generate horsepower and torque incomparably higher than cars. Such numbers would also reflect the vehicle's overall performance and towing capacity. Accelerating the truck would be easier when hauling heavier loads.
Is it financially better to buy a new or used car? ›
A new car may cost you less in terms of repairs, at least for the first few years. By the time the vehicle starts to need major repairs and upkeep, you may be ready to trade it in. If you pay cash, a used car may cost you more for maintenance but less in interest charges on a loan.
Is 2024 a good year to buy a car? ›
Experts say that 2024 will be the best year to purchase a new car since 2019. As interest rates slowly drop throughout the remainder of the year, payments will become more manageable. Don't overlook manufacturer rate promotions, as they can save you thousands of dollars.
Will the market be better in 2024? ›
As a whole, analysts are optimistic about the outlook for stock prices in 2024. The consensus analyst price target for the S&P 500 is 5,090, suggesting roughly 8.5% upside from current levels.
What's the best day of the year to buy a new car? ›
The weekends where you'll most likely find heavily promoted deals include Memorial Day, Labor Day, Fourth of July and Presidents' Day. Of those, Memorial Day is one of the best times to buy. It is the kick-off to the summer car sales season and typically offers a multitude of deals from both dealers and automakers.
Is May a good time to buy a car? ›
According to U.S. News & World Report, May is ideal because it's when the winter and spring auto show seasons have stopped and new vehicles previously on display are coming to dealer showroom floors.
What not to say to a car salesman? ›
Eliminating the following statements when you buy a car can help you negotiate a better deal.
- 'I love this car! ' ...
- 'I've got to have a monthly payment of $350. ' ...
- 'My lease is up next week. ' ...
- 'I want $10,000 for my trade-in, and I won't take a penny less. ' ...
- 'I've been looking all over for this color. '
Do work trucks wear out faster? While you might worry that work trucks wear out faster, pickup trucks last longer than cars on average. They are designed to withstand more wear and tear, so you don't have to worry about handling heavy-duty jobs.
What is the benefit of a truck? ›
Truck vs.
Trucks and SUVs each have their own pros and cons. Trucks excel in towing capacity, with the ability to haul heavier loads and provide an exterior bed for versatile cargo space. However, they have poor fuel economy, limited seating capacity, and lower maneuverability.
What's more reliable a car or truck? ›
Yes, Pickup Trucks are better than cars for many reasons that are, Great Build Quality, Good Safety rating, Durable, Reliable Engine, Long Life Span, Great Performance- High Power & Torque, Towing capacity, You Can Go Anywhere — Hills, Mud, Snow, Off-Road, Highway, Desert, Crop Fields, and Today's Truck Become modern ...
How much does Dave Ramsey say you should spend on a car? ›
When you're looking to buy a car, Ramsey and his cohorts explicitly believe you should never spend more than half of your annual household income.
Why isn't buying a new car worth it? ›
A used car experiences less depreciation.
A vehicle is a depreciating asset, meaning it tends to lose value over time. According to Kelley Blue Book, a new car loses 20% of its value in the first year after purchase. Within the first five years, that number grows to 60%.
What are the most reliable car brands? ›
Lexus ranks highest overall in vehicle dependability for a second consecutive year, with a score of 135 PP100. Among premium brands, Porsche (175 PP100) ranks second and BMW (190 PP100) ranks third. Toyota ranks highest in the mass market segment, with a score of 147 PP100.
Will auto rates drop in 2024? ›
Auto loan rates for new and used vehicle purchases fell in the first quarter of 2024 to 6.73% and 11.91%, respectively, down slightly from the 15-year highs we saw at the end of 2023, according to Experian.
What will the automotive industry look like in 2025? ›
The electric vehicle (EV) revolution is well underway, and by 2025, it's expected to hit a major milestone. It's predicted that electric vehicle sales will reach over 30 million in 2025, accounting for approximately 30% of all vehicle sales. This surge will be driven by several factors.
Will Toyota's price drop in 2024? ›
2024 Toyota bZ4X XLE EV: $193/mo Price Drop
With the introduction of the 2024 model, Toyota slashed prices on the remaining stock of 2023 models last month, and now follows suite with the new 2024 model. Due at signing prices are down $3,000 over last month.
What is the average car payment in 2024? ›
The average monthly car loan payment in the U.S. is $735 for new vehicles and $523 for used ones originated in the first quarter of 2024, according to credit reporting agency Experian.
