Buying a Car? These Tips Will Help You Be a Smart Shopper.
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Here's your money briefing for Monday, July 19th. I'm J.R. Whalen for The Wall Street Journal. This is not your father's car market. Demand is high and so are prices for both new and used vehicles.
So in this current environment, you won't find the same types of deals that you might have found in the past.
But you don't have to pay through the nose if you know how to shop wisely. Our reporter Allison Poley has been running the numbers and asking around. Coming up, she'll be here with the smartest strategies for buying a car right now. That's after the break.
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What’s driving high car prices and low inventory right now?
They say there's nothing quite like that new car smell, if you can find a new car. With prices well above what's on the sticker and inventory stuck in neutral, this is definitely not a buyer's market. But a smart shopper can have an easier time maneuvering around those challenges and find something to drive home. Our reporter Allison Poley is here with some tips she's gathered for prospective car buyers. Allison, thanks for coming on the show.
Thanks so much for having me.
So, you know, Alison, buying a car can be a big moment for individuals or families. But for people going into the current market to make a purchase, how do they need to sort of set their expectations?
I spoke to an expert who said everything you thought you knew about car buying from last year or whenever you last were in the market has changed. When people walk onto a car dealership, they'll see lower inventories and higher prices. That's because some of the components for cars, most notably the chips, are in a shortage at the moment. That means manufacturers can't produce as many new cars and that's driven consumers to the secondhand market where they're looking for used cars. Prices have increased for both new and used cars. Last month, for example, the average transaction price for a new car was about $40,000, which is an increase of 14% from a year ago. And that's according to the research firm JD Power.
Now for used cars, the average price was about $28,000, which is up 24% from June 2020. So in this current environment, you won't find the same types of deals that you might have found in the past.
And for car shoppers, this means having to be flexible and doing some research, you know, more than just doing simple comparison shopping. Now, you spoke to some people in the market for a car. How are they going about it?
I spoke to one consumer who lives in Huntsville, Alabama, and he was searching for a pickup truck. This is someone who had never bought a new vehicle before. So he went out looking for used vehicles and found that his selection was pretty limited. A lot of the vehicles that were available were expensive. and had many miles on them. So he called around to seven dealerships in his area and ended up ordering a truck directly from the dealer and he was able to pay less than $50,000 for that purchase where some of the used trucks that he was looking for cost $80,000.
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