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Winter is well underway, and we know that means slower vehicle sales. But new seasonally-adjusted data shows that the picture is improving ever so slightly. New vehicle supply is ticking up, and it looks like new vehicle prices peaked back in December. Here’s what the latest data reveals.
Marginal Improvement
According to a Cox Automotive analysis, new vehicle inventory increased gradually in the last weeks of January after starting the month near record lows. About 1.08 million new cars were on dealer lots at the end of January. While this is only slightly higher than the 1.08 million cars available at the end of December, a closer look at the data shows that inventory increased towards the end of the month.
In another barely noticeable improvement, the days’ supply of unsold new vehicles was 37 on February 1st, up from 35 days a month earlier. New vehicle inventory has been gradually rising since bottoming out at just 25 days of supply at the end of September. The seasonally-adjusted annual rate (SAAR) of sales was 15.0 million last month, down from 16.8 million in January 2021 (-12%).
Affordable Vehicles Remain in Short Supply
Buyers in today’s market will be relieved to learn that inventory of vehicles priced below $30,000 increased slightly in January after reaching record lows. Michelle Krebs from Cox Automotive put this intriguing datapoint into perspective for us:
“The available inventory of vehicles priced below $30,000 increased in January compared to the end of December. At the same time, there were significantly fewer vehicles priced above $60,000. This inventory mix – more bargains, less luxury – helped push the national average down from the December record. Still, new-vehicle prices in the U.S. remain elevated and consumers are routinely paying above sticker for a new vehicle.”
Affordability remains an issue for Americans. Vehicles under $20,000 asking price had the lowest days’ supply at just 28 days. All other segments had inventory between 32- and 37-days’ supply.
Import Brands Remain Hit the Hardest
Toyota, Kia, Honda, Acura, Land Rover, Porsche and Subaru all finished January 2022 with inventory levels below the industry average. Buick, Volvo, Infiniti, Cadillac and GMC had the strongest available inventory.
Minivans remain hardest hit, followed by all kinds of luxury vehicles.
Prices Dip Slightly
After setting records month after month, the average listing price dropped to $44,892 by the end of January. The average transaction price – the price consumers paid – also decreased in January to $46,404, according to data from Kelley Blue Book. That’s down slightly from December’s all-time high.
Your Friendly Reminder
Although this all might sound like marginally good news, we can’t forget the big picture. Cox data shows that available supply was down 60% in January from the same period in 2021. In raw numbers, the supply of unsold new vehicles was more than 1.6 million vehicles less than the stock of a year ago, and 2.2 million less than in 2020. The days’ supply at the end of January remained 46% below January 2021 levels.
Prices are still sky-high, even if conditions are improving ever so slightly. The average listing price for a new vehicle remains 12% above where it was one year ago. Manufacturer and dealer incentives continue to plummet, and this directly affects the final transaction price that buyers will pay.
The Chip Shortage Isn’t Over
In the past week, AutoForecast Solutions has increased their projection of vehicles lost in production due to the chip shortage to 1,253,100, a 63% increase in forecasted losses since the beginning of 2022. This is a bad trend to see right before the spring buying season gets underway. Will these marginal increases in new vehicle inventory and the slight dip in prices continue much longer?
The next month will be crucial in determining how prices and inventory will turn as we head into spring. CarEdge publishes weekly updates on the chip shortage and its impacts on inventory and prices. Be sure to bookmark the CarEdge chip shortage page to stay on top of the latest in these very volatile times.
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Carvana’s 150 point inspection can’t seem to catch some pretty significant problems, such as STOLEN and damaged vehicles. A Denver man has entered into an arbitration lawsuit with Carvana after the online retailer sold him a vehicle that was stolen from Hertz rental company 7 months prior, several states away.
After completing an online purchase of the car from Carvana, Dennis Atencio says that a repo truck showed up in his driveway to haul his beloved car away. The disgruntled customer was later able to get his car back, but the problems didn’t stop there. In what turned out to be a post-sale, stolen vehicle inspection, the owner found that the vehicle had previously been in an unreported accident and had sustained significant damage that Carvana had not “noticed” during their so-called 150 point inspection. CarEdge always recommends a pre-sale independent inspection for exactly this reason.
Carvana’s contract language makes it so that customers can’t sue the online retailer. However, Dennis is seeking other avenues of legal recourse. To make matters worse for Dennis and other Carvana customers, the point-of-sale is technically out of state in most scenarios, so state regulators rarely have any jurisdiction over Carvana. Consumer protection attorney Matt Osborne told The Denver Channel that buying from Carvana is really like buying in the Wild, Wild West.
A Troubling Trend For Carvana
Dennis’ problems are just the tip of the iceberg. An ongoing class action lawsuit against Carvana alleges many missteps the company has taken when interacting and selling to their customers. The most appalling accusations are the multitude of title and registration issues that prevent Carvana customers from legally driving the vehicles they’ve purchased. Now you can add ‘selling stolen vehicles’ to the pile of problems.
Despite what the annoying mom in Carvana’s Super Bowl ad has to say, proceed with extreme caution if you are considering buying from Carvana or any online vehicle seller.
We receive a lot of questions from CarEdge Members, and this one comes to us nearly everyday; “Is now a good time to buy a car?” While the past year has been anything but normal (used car prices increased more than 35% in 2021), we may actually be coming up on a period of time where buying a car might make sense. I promise we’ll explain below.
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Let’s discuss if right now is a good time to buy a car. Whether you should buy new or used, or if you should consider leasing. Let’s also keep in mind that the same rule applies as it did last year: if you don’t need to buy a car right now, please don’t. Prices are inflated, and while we are seeing some renewed deal-making, that doesn’t necessarily reflect a “great” value.
Let’s dive in.
Is now a good time to buy a car
Yes. The short answer is “yes.” How can we possibly say that when used car prices have increased 35%+, and new cars are typically selling for MSRP (or more)? Well, the answer is pretty simple, we’re seeing that dealerships are starting to get nervous about the expensive inventory they’ve purchased, and some are ready to get back to deal-making.
Ryan’s deal is a perfect example of what’s possible in the used car market right now. This is nearly 12% under MSRP. For months now we have seen dealerships selling cars, trucks, and SUVs at well over MSRP, and this is proof that not all deals have to be that way.
New car inventory levels are slowly starting to creep back up, and while dealerships do not have as much inventory as they did pre-pandemic, they are slowly but surely beginning to negotiate again. If you are going to factory order a vehicle, be sure to watch this video to get the best price possible.
Used vehicles
Okay, so that’s new cars. What about used vehicles. Is now a good time to buy a used car? It pains me to say it, but yes. Right now, after a very slow January (car sales were down nearly 10% in the United States), car dealers are getting cold feet while they floorplanvery expensive used car inventory.
Interest rates are increasing, and that means that the cost to hold inventory at a dealership is increasing as well. Each day a vehicle sits on a car dealer’s lot they lose money. A few months ago this wasn’t much of a concern because interest rates were very low, and consumer demand was very high.
Now, interest rates are creeping up, and after a slow start to the year, many dealers are getting nervous that they bought their inventory high, and may end up having to sell it low. In January we saw four consecutive weeks of wholesale used car price declines. A few months ago, if a dealer bought a used car for an inflated price they could simply go back to the auction and sell it for even more (used cars were appreciating). That’s not happening right now, and so dealers are more willing then they have been to negotiate and make a deal with a retail customer.
From our sources, we are hearing that dealers are taking up to $2,000 losses on used cars, simply to sell them and try and make the profit up on the “back end” of the car deal (the finance, extended warranty, etc.)
As a savvy CarEdge Member, we encourage you to go to Deal School, and come in prepared with financing and extended warranty quotes so that you can play offense instead of defense when you do go to the F&I Office.
When to buy a car in 2022
Is right now the best time to buy a car in 2022? That’s a great question. While we do think right now is a good time to buy, it may not be the best. Traditionally the end of the year is the best time to buy , that’s when dealerships typically have incentives from their manufacturers to hit volume-based sales objectives. As a result of the chip shortage those objectives have vanished.
With that in mind, the end of the year is no longer the absolute best time to buy a car. In 2022 what will dictate the best or worst time to buy a car will be based on how many vehicles automakers need to take out of production. Last year we lost 11 million vehicles globally as a result of the chip shortage. The expectation for this year is that we’ll lose 1 million.
If there are more new cars produced earlier in the year, and less losses than expected, we could be in for end of year car deals. If that doesn’t happen, then we could be looking at continued high prices.
We expect that used car prices will increase again in the spring with tax returns getting into consumers hands. Right now appears to be a very good time to buy a car in 2022 (again, with the caveat being, only if you need to).
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Car search websites are everywhere. Google search “cars for sale” and you’ll be greeted by tons of advertisements. It makes sense why — car dealers are willing to pay for leads, so in-turn car search engines are willing to pay to get car shoppers to visit their websites.
The issue with traditional car search websites (like AutoTrader, TrueCar, and CarGurus) is that they all prioritize the experience for their customers — the dealers that pay for those ads — and not the consumers (you and me). As a result if you try and use any of the name brand car search sites you’ll quickly realize you’re in for fake prices, spammy phone calls, and “sponsored” listings everywhere.
Today we decided to share the 3 car search websites we like to use to cut through the noise and actually get good information during our car search. No one has sponsored us or paid to be a part of this post.
Let’s dive in.
CarEdge – The best car search website
CarEdge does a few things right when it comes to building a truly consumer friendly car search website. First and foremost, we like that there are:
No car dealer ads
No lead-gen forms
No spam calls
No fake prices
If you’ve ever searched for a car on one of the traditional car search engines you know how frustrating it is to see one price, fill out the form, get multiple phone calls, and then learn that the “real” price is much higher than what was advertised online. CarEdge solves this problem with their simple and intuitive car search site.
CarEdge has new, used, and certified pre-owned search filters. There are no sponsored listings or ads on the website. This might not sound like a big deal, but once you experience an ad-free car search website you won’t want to go back. The TotalPrice shows you how much you should really expect to pay for the car you are interested in, and the “coaching” from former dealers is useful and helpful.
The negotiation insights and 4 step buying guide are really helpful, especially for car shoppers who want to get the best deal possible.
What we like
No ads
No lead-gen forms
We love the TotalPrice
The 4 step buying guide is super helpful (especially the email templates)
Seeing the extended warranty price is helpful
What we don’t like
We want to be able to save searches
No “favorite” vehicles option
It would be great to see what the TotalPrice would be with my trade-in
CarEdge – The best cost of ownership info
Many car buyers focus on performance, safety, tech, or comfort when it comes to their vehicle. CarEdge isn’t trying to change that, but they do want consumers to put a bit more focus on cost of ownership. Remember, cars (usually!) are depreciating assets! This means that after a few years of ownership you could be thousands of dollars underwater in your new ride.
CarEdge wants car buyers to make smarter financial decisions, and to do that they have invested a lot of time and money into building a great car search website with vehicle depreciation and cost of ownership data. CarEdge might not have the “sexiest” website, but their data is unparalleled in the industry. We don’t know of any other car search websites where you can get detailed depreciation, maintenance, and total cost of ownership data on a particular year, make, model, and trim of vehicle FOR FREE!
What we like
The depreciation calculator is super customizable
The maintenance and repairs estimates are detailed
The CarEdge Value Rating is a helpful “at a glance” indicator of a vehicle’s future resale value
What we don’t like
Ads … They’re EVERYWHERE. We get it, they need to keep the lights on, but the ads are everywhere
The user interface isn’t that pretty (but it is functional!)
Sometimes it can feel like information overload
AutoTempest – The best search for used cars
One of the most common questions we get at CarEdge is, “How can I find the exact used car I am looking for, with the right packages, options, etc?” The answer is, it’s really hard! We know a lot of car shoppers are looking for ways to get window stickers on used cars, and while AutoTempest doesn’t have a solution for that (no one really does), they do have a REALLY powerful used car search engine that DEFINITELY helps you zero in on the car you’re looking for.
AutoTempest is a car search aggregator. They pull together listings from multiple sources into one search. Think of AutoTempest like Kayak but for used cars.
Through their partnerships with Cars.com, TrueCar, Carvana, and more, AutoTempest is able to provide the most comprehensive used car search on the internet. Take a look at the initial search page … That’s a lot of options! AutoTempest is seriously the industry leader when it comes to filtering and options for used cars.
What we like
The most robust used car search website we’ve ever used
The filters! There are so many filters!
Listings alerts (you can get emails when your search updates)
What we don’t like
Ads … They’re not as prevalent as CarEdge, but they sure are there
Using the site at first can be a little intimidating (information overload)
That being said, everything in 2021 has been abnormal, and for the first time since 1896 (the year the first car dealership opened!), automakers aren’t waving hundreds of thousands of dollars in “incentives” in front of their dealers. Instead, this year, unlike any other, end of year quotas aren’t in effect. If a dealership has a quota, it is self-imposed, and not from the manufacturer. As a result, our expectation is that end of year car deals will less attractive than in years past.
With that in mind the question remains, “Should I buy a car now or wait until 2022?” Let’s dive in and answer that!
Is it better to buy a new or used car right now?
Let’s kick things off with a quick discussion on buying new vs. used right now. In today’s market there is a short supply of both new and used vehicles. How tight is supply? Typically there are 2 to 3 million new cars in inventory at any given time. Right now that number is less than 1 million.
Used car inventories are not doing much better. Because of the lack of new car supply, more and more consumers and businesses (think rental car companies) have been buying up used cars. That, paired with that fact that very few lease cars are coming back to the market (and with good reason, most people are buying out their leases and making a profit), we’re in a situation were used car prices are up more than 50% in 2021 alone!
This is as good a time as ever to remind you that if you don’t need to buy a car right now, you really shouldn’t. Prices on both the new and used car side are astoundingly high. However, in our estimation, new cars are a better value right now than used cars. That because we have seen CarEdge members get deals at MSRP on new cars, which represents a way better value than buying a comparable 2 or 3 year old used car for it’s original MSRP with tens of thousands of miles on it.
Is it better to buy new or used right now? The answer, if you can afford it, is buy new.
Should I buy a new car right now?
If you do decide to buy a new car right now be prepared for the process. Many dealerships do not have inventory on their lot, and that means you’ll be placing a factory order. We have a complete step-by-step guide to factory ordering for FREE that you can use.
Your goal for a new car deal should be MSRP + dealer doc fee + taxes + registration. If a dealership is trying to add on thousands of dollars in extras, you can and should negotiate on them.
The amount of negotiating leverage you have will also depend on the local area supply of vehicles. For example, if you’re looking to buy a new 2022 Subaru Outback, it’s helpful to know that the days supply of inventory right now is 5. Compare that to the days supply of inventory of a new 2021 Ford EcoSport which has a days supply well north of 100. You are much more likely to get a car dealer to negotiate on the EcoSport (which has been discontinued), then you will with a Subaru dealership. It’s simply because they have more supply of the EcoSport than the Outback.
If you chose to buy a new car in this market, this type of local market analysis can help you come in prepared (and with realistic expectations) for your car deal. You can capture all of this data for free by simply using the car search on caredge.kinsta.cloud.
Should I buy a used car right now?
Used car prices are through the roof. There is no other time in history where we have seen used car prices appreciate as much as they have in 2021.
Should you buy a used car right now, even at the end of the year? No. Not unless you absolutely cannot afford a new car, or cannot afford to wait for a factory order. If you do decide to buy a used car their are a few tactics you can use to determine if you are paying a fair price (relative to the current market conditions).
The first suggestion we have if you are buying a used car is to see what Black Book, Carvana, and Vroom would pay to buy the car if you were selling it to them. To do this you can simply take the VIN of the vehicle you are interested in purchasing, and run it in Black Book, Carvana, and Vroom. See the short video below.
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Once you’ve seen the valuations from Black Book, Carvana, and Vroom, you should have a pretty good sense for if the vehicle is priced fairly. If it is, when you contact the seller be sure to get the out the door price (we encourage you to use our free email templates to do that), and then request a pre-purchase inspection. We have a complete guide to pre-purchase inspections here.
FREE car buying tools & resources
To recap, you should only buy a car right now if you need to, not it if you want to. That being said, if you do buy a car right now, we think new cars represent a better value than used cars. In your quest to find a car dealer who will sell you a new car at MSRP, here are a few resources you should reference:
We hope this helps you answer the, “Should I buy a car now or wait until 2022” question. CarEdge is here to help you as you navigate one of the strangest and most difficult car buying markets of all time.
Here are comments from CarEdge Community members on the original post that inspired this article.
CarEdge Insights
