Enjoy your long weekend soaking up the final vestiges of summer? Last minute visits to your New York/New Jersey Metro pool, outdoor amusements, a little grill-out … maybe buying a new car?
Typically Labor Day is one of the biggest car shopping days of the year. As dealers look to clear out stock to make way for next year’s models, they’re known to put out some pretty nice offers. Like lower APR percentages for a period of the car loan (anywhere from 36 – 60 months depending on the vehicle). And with current APR costs hitting around 7% for most borrowers, that’s an extremely enticing deal.
If you’re thinking about going the EV route, there are some tax incentives you could lay hold of if the vehicle qualifies. I’m happy to discuss that further.
So, what does the car shopping landscape look like right now and how does it affect you? Read on to find out.
New York/New Jersey Metro Car Shopping in 2023
“In the beginning, the automobile was a toy. And it was only after it became a toy that it became a necessity.” – Sir William Lyons
Buying a new car has always had its charm. It’s a fresh start that feels a bit luxurious.
But in 2023, that experience is even more at a premium, and even more out of reach if you’re living on a tight budget. And just when you’d want to look at purchasing a used car, the shortage of new cars in the past 2-3 years means current used car costs are sometimes almost as costly as going the new vehicle route.
Even with those factors, you might still need to be in car-shopping mode. So, if you’re looking to buy a car still this year, let’s make sure you have a clearer picture of the car shopping scene right now!
How we got here
The car shopping landscape in 2023 is one marked by skyrocketing prices and interest rates. The root of this surge can be traced back to a few key factors.
First, the global microchip shortage during 2020 and 2021 disrupted supply chains massively, creating a serious ripple effect on car production and car prices.
And thanks to inflation, interest rates have soared to around 7%, making auto financing a lot more expensive.
Not to mention, getting a car loan has become a stiffer process, with more scrutiny and higher rejection rates.
The current car shopping landscape
If you are considering splurging on a brand-new car, brace yourself for some hefty figures. Right now, the average new car sits around 48k which means if you are getting an auto loan, you’ll need one in the 40k range (pretty average for new car purchases right now). This puts you at an average monthly payment around $730, with an annual percentage rate (APR) peaking at 7.1%, the highest since 2007.
A growing number of consumers (around 17%) are taking on monthly auto payments exceeding $1,000, with nearly 3/4 of those in high interest rate situations. Taking on a higher car payment with that kind of interest often means paying more on interest than principle and being in danger of falling into negative equity.
And keep in mind, as the Fed hints at further interest rate hikes in the back half of the year, it’s almost sure that auto loan rates will follow suit.
Even affordable cars
If you’re faced with a limited budget, your options seem to be narrowing. Sub-compact cars, which were once a beacon of affordability, have also gone up in price. The Mitsubishi Mirage is currently the only new vehicle under the 20k mark now. But a few others, like the Kia Rio and Nissan Versa come in at less than 25k.
As the availability of these lower-cost new cars dwindles, looking at certified pre-owned small cars could offer the affordable option you’re looking for (along with a reassuring warranty).
Electric vehicles on the rise
2023 is also witnessing a shift in focus towards electric vehicles (EVs). Automakers are prioritizing EV production as demand surges and government incentives become more enticing. Even luxury brands like Mercedes and BMW are stepping up to compete with Tesla to get their own electric car concept on the market.
Currently, the average EV carries a price tag of around $64,000 — almost 20k more than you would spend on a non-EV vehicle. And, while EVs might not be as affordable as other vehicles, the allure of better mileage, better efficiency, and even some financial kickback could make this a viable option.
Thanks to the Inflation Reduction Act in 2022, buying an EV in 2023 could potentially earn you tax credits of up to $7,500 for new vehicles and $4,000 for used ones. If you’ve found an EV you’re interested in, but you’re not sure that your purchase would qualify for a tax credit, just head over to the EPA’s qualifier pages to find out for sure: New Clean Vehicles or Used Clean Vehicles.
Car shopping tips
If the allure of a new car is something you just can’t circumvent, here are some tips to help you navigate the 2023 market:
- High trade-in values: Your existing car might fetch a handsome trade-in value, softening the blow of high prices.
- Manage loan rates: With high auto loan rates, it’s prudent to come prepared with a substantial down payment (around 20%) and a clear budget.
- Know what you can afford: Use resources like this auto loan calculator to understand potential payments and interest.
- Consider holding off: Given the market dynamics, you might find value in holding onto your current car and investing in quality repairs.
While Brooklyn car shopping in 2023 presents its own challenges, equipping yourself with the right knowledge and preparing for that purchase can help you navigate this landscape with confidence.
In your corner,