Why Buying a Car Has Drastically Changed
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Here's your money briefing for Tuesday, August 8th. I'm J.R. Whelan for The Wall Street Journal. During the pandemic, a shortage of parts and chips resulted in sticker shock for anyone hoping to drive off with a new set of wheels. But even as the supply crunch has eased, buyers are still digging deep to purchase a car.
Demand's just still sky high. It's defying all expectations, in particular this year, where everyone expected a slowdown given how high prices have gotten.
We'll talk to Wall Street Journal reporter Ryan Felton about the post-pandemic automobile market and whether there's any relief in sight after the break.
The pandemic upended the automobile industry and changed the way we shop for cars. And some of those changes are here to stay. Wall Street Journal reporter Ryan Felton joins me from Detroit. So, Ryan, we saw inventories tighten up during the pandemic, and that drove prices significantly higher. The average price jumped more than 35 percent from 2019 to the end of last year. But now that supply chain issues are easing, will we see prices come down?
In the near term, the answer is no. The general consensus is what we're probably going to see is just more of like an evening out of prices. They're not going to come back down as fast as they shot up, but the sense is that they're starting to level off with respect to new car prices. At some point, though, the expectation is that whether it's six months, a year or two from now, or even more, there's going to be more desire to open up the market again to new car buyers who want to buy something that's more affordable than the $20,000 range, as opposed to the $30,000, $40,000, $50,000 ranges that are now more associated with cars of today and That could involve introducing more basic versions of cars that are on lots today.
A lot of folks have been buying stuff that has a lot of add-ons and options included.
What's keeping the prices higher in the near term?
Demand's just still sky high. It's defying all expectations, in particular this year, where everyone expected a slowdown given how high prices have gotten.
How did the pandemic cause sticker shock and higher new-car prices?
A lot of analysts have thought how many buyers out there could really pay for or want to pay an average price of $40,000 to $50,000 for a car. But we're still just seeing that there are plenty of people who have the means or have the ability to finance cars or who are still more than willing to. And, you know, given that supply is still tight, I mean, we're still at around, I think, half of what there was prior to the pandemic, prices are still elevated.
What stands out to a lot of people when they drive by car dealerships is all the empty slots. In some cases, far less cars for sale than before the pandemic. Are dealers seeing their supplies increase?
Yeah, but if you talk to dealers across the board, they're saying we're definitely getting more product from the basically zero amount of cars they had during the pandemic. But most of them are still looking forward to getting more supply. There's still plenty of cars that are being pre-sold before they even hit the lot.
You know, to avoid the hit on their wallet, some people might consider leasing a vehicle and not buying it. And leasing promotions were pretty common until inventories shrunk. Can drivers expect to see those deals coming back?
Eventually. There are more deals to be had now compared to before the pandemic. That's kind of the theme here. But it's slow going. Leasing represented about one third of
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