Memorial Day Weekend Car Buys ‘Looking Pretty Gloomy’

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One of the best car shopping weekends before the pandemic is more of a dud these days.

Amid the auto industry’s manufacturing challenges due to lingering supply chain issues, Memorial Day sales are typically minimal to non-existent this year.

“It seems pretty bleak, to be blunt about it,” said Ivan Drury, Edmunds senior manager of insights. “It’s getting harder and harder for people to get a new car with the features they want at a price they’re willing to pay.”

The median amount paid for a new car is more than $45,200, up 18.7% from a year ago, according to a joint forecast from JD Power and LMC Automotive. Buyers are paying about $700 above the sticker price on average, Drury said.

At the same time, the average incentive offered by dealers has fallen to an all-time low of $1,034, compared to $2,996 a year ago, the JD Power/LMC forecast shows. Generally speaking, dealerships don’t need to offer many incentives to sell cars these days.

In fact, even though the pace of sales slowed 23.8% from a year ago due to reduced inventory, the average profit per car at dealerships is $5,046 up from $2,733 a year ago.

It’s getting harder and harder for people to get a new car with the features they want at a price they’re willing to pay.

Ivan Drury

Senior Knowledge Manager at Edmunds

“This elevated level of unit profit more than offsets the drop in sales volume,” Thomas King, president of JD Power’s data and analytics division, said in the forecast.

Meanwhile, faced with limited inventory for a new vehicle, a growing share of buyers are turning to used-car lots, Drury said.

“Many new cars you see in [dealer] websites that are labeled ‘coming soon’ or ‘in transit’ are already sold,” Drury said. “So unless you can reserve that vehicle and wait three or six months, you’re going to end up in a used car. “

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Of trade-in buyers, 45% end up with a used vehicle compared to 35% a year ago, Drury said.

Of course, there is little relief in the used car market. Average prices increased 22.7% in the last 12 months, according to the latest data from the Bureau of Labor Statistics. Transaction amounts average $29,948, Edmunds research shows.

However, this means that the trade-in values ​​are also higher.

“For your own used vehicle, get multiple quotes,” Drury said. “Take advantage of that.”

Another thing to consider is the cost of financing. The average rate paid on new car loans is rising. It reached 4.7% in April, compared to 4.5% in March and 4.1% in December, according to Edmunds. With the Federal Reserve expected to continue raising a key interest rate affecting consumer lending, car buyers are likely to find themselves facing higher rates in the coming months.

However, well-qualified buyers can get a decent rate, depending on the car.

“You can still get zero or maybe 1.9% funding,” Drury said.

For used cars, the average rate is 8%. However, for Certified Pre-Owned vehicles, which have typically passed a rigorous inspection and come with an extended warranty, you may be able to find special financing offers.

“It could be 1.9% or 2.9% or even a cash refund,” Drury said.

And while those used cars may cost more, you could pay a higher interest rate on a loan for a non-certified version.

“Even if you save money up front with a non-certified used car, you could end up paying more overall,” Drury said.

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