Quick Facts About the Car Buying and Selling Marketplace
As the end of the year approaches, conditions look good for car shoppers. Car dealers continue to discount new cars heavily, and lenders have made it easier and less expensive to borrow money.
Used car prices have risen slightly, but we see signs that the rise may not last.
We can still make a good argument for waiting to buy a new car. But those who have been waiting for the right time to buy might easily decide this is it.
We’ll walk you through what to expect while buying or selling a new or used car or trading one in. Many car shoppers are in both markets simultaneously, with a vehicle to swap. They’re likely to find balanced offers on their trade-in this month. Read on to find out more.
What New Car Shoppers Can Expect
The average new car shopper paid $48,623 in October. That’s a slight increase from September’s average, but the increase came because buyers chose slightly more luxurious cars. Dealers, for their part, discounted the average car by 7.7%, up from 7.2% the month before.
Discounts have increased an astonishing 60% in just one year. They still have room to grow. Before the COVID-19 pandemic radically shifted car prices in America, discounts routinely made up 10% of the average new car sale.
The winter holidays often provide an excuse for more advertised discounts.
“’Tis the season for automakers to make their final push for 2024 sales,” said Cox Automotive Executive Analyst Erin Keating. “While some automakers focus on managing production, many will likely maintain or even increase their seasonal incentives to attract buyers. With competition intensifying, these strategies will be crucial in maintaining market share and driving end-of-year sales. Our team is generally optimistic for new-vehicle sales to close out the year – extra incentives will certainly help.”
Cox Automotive is the parent company of Kelley Blue Book.
Some automakers remain overstocked. Stellantis — parent company of Chrysler, Dodge, Jeep, Ram, and others — has had more cars than it wants for much of 2024. All four of those Stellantis brands had average incentive packages of over 10% in October as they worked to clear the inventory glut.
Not every brand shares that problem. Toyota and Lexus remain well under normal inventory levels, with little reason to slash prices.
The difference shows up at the negotiating table. If you’re shopping for a Toyota this month, you may have trouble finding the one you want and shouldn’t expect a discount. If you’re shopping for a Ram or a Lincoln, it should be easy to find the right one at a discounted price.
Borrowing to buy a new car has also grown easier. After tightening loan conditions for most of 2024, lenders have begun to loosen them, approving more applications for two months in a row.
We’d also caution shoppers to keep insurance costs in mind. While new vehicle prices are coming down, car insurance premiums spiked. Car insurance prices have grown so high in the past year that we encourage shoppers to get insurance quotes on any car they’re considering before they put a dollar down. Insurance costs might make you consider a different vehicle.
Recent Interest Rate Cuts Are Showing Up Slowly
Prices are all cash buyers need to worry about. But few of us are cash buyers. Most Americans borrow money to buy a new car. We have good news for those who finance car loans. The Federal Reserve has now cut interest rates at its last two meetings, and projects that a third cut is likely coming.
The Federal Reserve, commonly called “the Fed,” sets the interest rate banks use when they lend each other money. That Fed rate governs rates for every other kind of loan, including car loans. It’s finally on the way down, which should ripple through the economy over the next few months.
Those cuts take time to reach car shoppers. Lenders haven’t lowered their own rates as much as the Fed has, but that’s normal.
Jonathan Smoke, Chief Economist for Cox Automotive, explains, “The Fed does not directly control the rates consumers see, and auto loan rates may end up being the slowest to move.” Auto loan rates may take “several weeks or even months” to respond to the Fed cut, he told us recently.
That has held true, but as the year end approaches, lenders are starting to pass the rate cut on to borrowers. “I expect the best time for lower rates will be by the spring,” Smoke says.
What Used Car Shoppers Can Expect
Used car prices ticked up slightly in October. The average used car in America sold for $25,499 in October, up $138 from September’s average.
That increase came not from dealers raising prices but from shoppers buying newer used cars. October saw a larger-than-normal supply of recent used cars hit the market. We expect small ticks up and down but not major disruptions to the used market for the rest of the year.
We predict retail used car prices by watching the prices dealers pay at auction for used cars they later sell. A trend in wholesale prices tends to become a trend in retail prices after about six to eight weeks.
Throughout late 2024, they’ve risen slightly, then fallen slightly. The prices chalked on windshields at the local used car lot are likely to do the same. Most recently, wholesale prices dropped in October. That presages lower prices around the end of the year.
The nationwide used car supply will likely remain thin for years. Pandemic-era disruptions meant automakers built about 8 million fewer cars than they otherwise would have in 2021 and 2022. That’s 8 million cars that will never reach the used market, keeping supplies low for a long time.
Shoppers may have particular problems finding older, higher-mileage used cars priced under $15,000. Used cars below $15,000 continue to show low availability, with only 33 days’ supply.
Ford, Chevrolet, Toyota, Honda, and Nissan were the top-selling brands, accounting for 51% of all used vehicles sold in October.
Automakers Are Building More Expensive Cars
Though short-term trends may push new car prices down, automakers are focusing efforts on building more premium cars. The era of the inexpensive car is disappearing. A recent analysis finds that sales of cars priced at $25,000 or less have fallen by 78% in just five years. Five years ago, automakers offered 36 new models in that price range. Last year, that number was just 10. Automakers have announced plans to cancel most of those ten.
Meanwhile, those priced at $60,000 or higher have grown by 163% during the same period.
Smoke explains that last year’s Federal Reserve interest rate hikes kept some shoppers from buying cars. “This trend induces automakers to focus on profitable products for consumers who can afford to buy, which keeps less affluent consumers out of the new vehicle market altogether and limits what is available and possible in the used market for years to come,” Smoke cautions.
Dealers are pushing back, telling automakers they need more affordable cars to sell. But correcting the problem will take time. You’ll likely find affordable cars in short supply on many sales lots.
Older, Less Expensive Cars Harder to Find
If you hope to find an older vehicle and your budget is less than $15,000, these cars remain in short supply. More would-be new car shoppers started buying up the available used vehicles, drawing down the inventory. Plus, Americans are holding onto their cars longer than ever. The average vehicle on American roads is now 12.6 years old. Automakers also produced fewer cars for several years after the 2008 recession, leaving fewer higher-mileage, older used vehicles available to sell.
The most accessible used cars are priced between $15,000 and $30,000.
How to Buy a Car Right Now
If you want a new or used vehicle, shoppers are still getting sticker shock. New car prices remain about $10,000 higher than five years ago, before the COVID-19 pandemic. That’s when the average transaction price for new vehicles was around $38,259. But take stock that your next car will likely last longer and help you drive safer than ever with all the technological advances and offerings.
RELATED: Buying Older, Used Cars in 2024
Vehicle quality studies repeatedly show that today’s new cars suffer fewer problems than those from just a few years earlier. Buyers of higher-priced used cars will likely see the vehicle driving on the road even longer. The same goes for those buying new ones.
With most automakers now building such durable cars, they compete by adding more high-tech features. Features like adaptive cruise control and Apple CarPlay are now more common than ever on entry-level vehicles. Read on to see our tips on buying a car below.
How to Leverage Incentives to Buy a New Car
In October, car incentives comprised 7.7% of the average deal, or $3,744, up from 7.2% in September. To take advantage of incentives, read about our monthly best car deals to find dealer or manufacturer incentives, including cash back and lower interest rates for financing your next vehicle.
RELATED: How to Buy a New Car in 10 Steps
Selling a Car Right Now
Few of us can sell a car without needing to buy a replacement. But, if that’s you, what are you waiting for? You could get more for your vehicle if it’s in high demand, and that’s excellent news. The best way to get the most money for your used car is to sell it privately. But if you don’t want the hassle, there is still an opportunity to sell to a dealership.
PRO TIP: If selling a car, consider selling it peer-to-peer using Kelley Blue Book’s Private Seller Exchange marketplace. It’s a low-cost method that helps consumers earn more for their vehicle than selling to a dealership.
Trading in a Car Now
The ongoing shortage of used cars will be with us for years. As a result, you’ll likely still see respectable offers for your used car this month.
“Fewer new vehicles produced in 2021 meant lower leasing, which equals fewer lease maturities starting this year,” said Jeremy Robb, senior director of Economic and Industry Insights at Cox Automotive. After being low for the last two years, used-vehicle supply is expected to improve later in 2024 — but that will be without much help from off-lease supply.”
Searching for a decent price for your trade-in is still a good idea by shopping it around. Each dealership tries to keep a balance of vehicles on its lot. Sometimes, the one you want to buy from doesn’t need your trade-in desperately, but a competitor does.
Research your vehicle’s Kelley Blue Book value, then call several local dealerships to see what they’ll offer you for it. Or try our Instant Cash Offer tool, which brings the deal to you from various dealerships without obligation. You can choose your preferred offer or use it to negotiate with others.
Is Trading In Your Vehicle a Good Idea?
Possibly. If your vehicle is in high demand, you could get more money for it than usual. It will help defray the costs of buying another car, whether it’s new or used. However, if your vehicle is not in high demand, you can expect to get close to Kelley Blue Book value for it. Use Kelley Blue Book’s car valuation tool to find out the price of your new or used car.
Can You Trade-in a Vehicle That’s Not Paid Off?
Yes. If your car is paid off or if it’s not, you can still trade it in. However, a car depreciates when you drive it out of the dealership. It’s best to take stock of how much equity you carry in the vehicle. Take the difference between the car’s current market value and what you owe to figure that out. Read our story on selling a car.
Looking Ahead
According to the Cox Automotive/Moody’s Analytics Vehicle Affordability Index, new cars are now more affordable than they’ve been at any point in more than three years. But two trends complicate the picture.
One is the Federal Reserve rate cut. Our economists tell us it will reach car shoppers slowly, perhaps as late as December. Borrowing to buy a new car may be easier if you can wait until winter.
But those automakers with overstocked lots know they have a problem and are working to correct it. Stellantis has plans to pause construction of some new cars while its dealers sell down the backlog. If you’re interested in one of their overstocked models, you may want to shop soon while dealers are still oversupplied and looking to negotiate.
RELATED: 10 Best Used Car Deals
Tips for Buying a Vehicle Right Now
If you shop right now, we recommend a few strategies to help you find the right new or used car that fits your budget.
- Expand your search. Widen your search to a broader geographic area.
- Stay patient. Call dealerships early and often to see what’s coming off the trucks for those harder-to-find vehicles. Leave a refundable deposit if you want first dibs.
- Buy a less expensive model. With higher car loan interest rates, consider buying a cheaper vehicle model instead of a more expensive one in the lineup you’re considering. Understand how much you can afford.
- Understand the timing. Be prepared to compare deals, and know it involves calling or visiting several dealerships as you look for the right fit.
- Weigh your options. Don’t just look for a car; search for the best interest rates from banks or credit unions. Also, shop for your insurance rates ahead of the deal to know how much the higher auto insurance costs will cost for your desired vehicle. Then, weigh all your options, including financing incentives and deals at the dealership, if that’s where you buy your next vehicle. Also, you may find the price differences of some newer model used vehicles are almost the same as new cars. Just keep all your options open during your search.
- Don’t pay dealer markups. If you see a markup, sometimes called a market adjustment, on your final invoice, ask that it be removed or shop at another dealership.
- Question all add-ons. If your sales summary includes entries like “window tint” or “fabric protection” and other add-ons you didn’t request, ask for those line items to be removed from your invoice. Many dealers tack on these extras to make quick profits.
It may make sense to keep your existing car for another year. If you must buy, be prepared to take excellent care of your next car to keep it running for a long time.
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Editor’s Note: This article has been updated since it was initially published.
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