Sticker Shock Keeping Car Buyers on the Sidelines
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What is the main topic discussed in this episode?
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Here's your money briefing for Tuesday, February 7th. I'm J.R. Whalen for The Wall Street Journal.
How did car availability change since the pandemic and where do inventories stand now?
Remember trying to buy a car during the pandemic? It was slim pickings. Well, now dealer inventories are up, but buyers are still on the sidelines, and that has car dealers anxious.
The issue that the car industry is facing now is not only do we have high prices, but higher interest rates as well, which is making those monthly payments much more difficult for many buyers.
So what are car dealers doing to move vehicles off the lot? And what can consumers do to lessen the bite of rising interest rates? We'll talk to Wall Street Journal reporter Sean McLean about that after the break.
This podcast is brought to you by ReliaQuest. Cyber criminals are constantly attacking. They want your data. They want your identity. They want your innovation. ReliaQuest fortifies your business with agentic defense, AI that detects, contains, and eliminates cyber threats in minutes.
Why are buyers still on the sidelines despite more cars on dealer lots?
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During the pandemic, supply chain issues created a lack of new car inventory and drove prices sharply higher, keeping prospective buyers on the sidelines. Now dealers have more cars on the lot, but buyers are still putting off buying a car. So what are dealers doing to get people back on the lot and, you know, kick the tires? Wall Street Journal reporter Sean McClain is here to talk about it. Hey, Sean, thank you very much for being with us.
Thanks for having me.
So, Sean, it wasn't that long ago we were talking on the show about the difficulty consumers had in even finding cars on dealer lots to buy. Where do things stand now?
Well, the good news is that vehicle inventories are coming back as carmakers can produce more of them. It seems the semiconductor shortage is ending and there are more cars than there have been in a long time available for sale.
How have record-high new and used car prices affected trade-ins and affordability?
There's still about half of pre-pandemic levels. The problem is we're still hitting all-time records in sale prices and most car makers expect that these tight supplies will last throughout the rest of this year.
All right, so new car inventories are growing. That's good news for prospective buyers. So what's still keeping them on the sidelines?
Well, buyers we've spoken to and dealers as well say that customers are discouraged by the price of purchasing a car. The shortage of new cars over the pandemic really pushed up the price to record levels, and that's why they're staying away. People are holding on to cars longer than ever in the U.S., and dealers are now starting to be worried about that. The average price paid for a new vehicle hit a record of $47,362 in December. While those record high prices obviously kept many buyers away during the pandemic, the issue that the car industry is facing now is not only do we have high prices, but higher interest rates as well, which is making those monthly payments much more difficult for many buyers.
And then you compound with that the fact that used car prices, which had risen rapidly over the pandemic and allowed people to earn more from their trade-ins, those wholesale values of used cars are now falling as well, which means there's a bigger gap to overcome. And I think the last piece of the puzzle here is that during the pandemic, automakers really focused on producing higher-end versions of each model.
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:00–0:40
2
How did car availability change since the pandemic and where do inventories stand now?
0:40–1:28
3
Why are buyers still on the sidelines despite more cars on dealer lots?
1:28–2:35
4
How have record-high new and used car prices affected trade-ins and affordability?
2:35–5:15
5
What role do interest-rate increases play in deterring car buyers?
5:15–6:50
6
How has the shift toward higher‑trim models influenced shopper options and prices?
6:50–8:53
7
What tactics are dealers and automakers using to move vehicles off lots?
8:53–9:30
Speakers
3 identifiedMore from WSJ Your Money Briefing
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