- Purchasing a vehicle ahead of a possible recession may not seem like a good idea, but if you have the financial means, now is a fantastic time to do it.
- The current economic scenario differs from the Great Recession of the early 2000s, which resulted in the drying up of lines of credit for potential buyers.
- Dealerships may not be available to the public, but they are nevertheless open for business, prepared to deal with potential buyers over the phone and online.
What happens to automobile sales during a downturn?
The US economy was affected by the financial crisis between December 2007 and June 2009 “The “Great Recession” is the greatest economic downturn since the 1930s’ Great Depression. As a result, the US automobile industry has faced unprecedented challenges: during the recession, light-vehicle sales fell by 6 million units, and two of the three largest automakers in the world went bankrupt “GM and Chrysler, two of the “Big Three” automakers, went bankrupt. Since then, the US economy has gradually improved, and the vehicle market has recovered to pre-recession levels. In fact, the automobile industry has rebounded faster than the rest of the economy, which is experiencing slow and uncertain recovery. GM and Chrysler emerged from bankruptcy as new, leaner businesses with fewer brands, plants, and employees, as well as lower debt and market share. When the US market was still below 12 million automobiles sold per year, the revitalized Big Three returned to profit in 2009 (Ford) or 2010 (GM and Chrysler). Now that the market is expanding again, these companies are making higher profits and are on their path to reaching 16 million units in the near future. GM and Chrysler have redeemed their loans and returned to the stock exchange, allowing the US government to sell a portion of its ownership in the companies’ equity.
Will automobile costs fall?
“We’ve probably past the top of prices,” says Alex Yurchenko, senior vice president and chief data science officer at industry researcher Black Book, which specializes in used-car prices. According to Yurchenko, the costs would continue to rise “is a hard topic with numerous aspects. Wholesale prices have already begun to fall. Retail prices, as well as wholesale prices, are expected to fall over the next two months. However, the fine print is that, while prices are expected to fall, we’re beginning from such a high point that we’re unlikely to return to pre-COVID levels anytime soon.”
“Because off-lease vehicles are when you get pre-owned cars, they’re three years behind on average. As a result, we already know that the number of automobiles accessible on the market in 2023 and 2024 will be significantly smaller.” That means higher prices for at least another two years.
Big Changes for Dealers
According to Abuelsamid, significant changes to the dealership business will likely imply that past discounts and incentives will not be reinstated. “Manufacturers will attempt to maintain the discipline of matching inventories to sales demand in order to keep prices high.” As a result, I don’t believe we’ll be able to get back to where we were in 2019.” He really does mean “forever.” “We’re going to be in an environment where used inventory is limited for probably the next three, four, or maybe five years,” Yerchenko adds. As a result, prices will continue to rise.
According to such projections, new automobiles will remain in short supply until at least 2024, and the amount of used cars on the market would behind demand for at least another couple of years after that. To put it another way, it will be a long time before both new and used automobile prices return to pre-COVID levels.
Plan to Order and Wait, but You Can Still Get a Car
There’s no purpose in waiting, Abuelsamid says. “I’ve been urging friends and neighbors who are thinking about buying a car to plan ahead, give yourself a few months to pick exactly what you want, and then go to a dealer and factory-order it. As a result, when it arrives, it will be assigned to you.” If you’re trading in, keep in mind that your used car is likely worth tens of thousands of dollars more than it was a few years ago, which will help to balance the rise in vehicle prices.
Brinley suggests, “Now we have to look at car buying a little bit differently.” “Recognize that, despite the scarcity of new vehicles, they do exist. You don’t have to accept whatever price is provided to you if you’re a bit patient. Another dealership is located a short distance away. Another vehicle is approaching down the road. It may mean that after you’ve spent ten months researching and are ready to buy, you don’t get your new automobile in two days. It’s possible you’ll have to wait. As a consumer, be proactive; you don’t have to accept the first offer that comes your way.”
This is hardly the news any of us who enjoy vehicles, new or old, wanted to hear. But it’s time to accept the new reality: vehicles of all types and ages are now much more expensive than they were prior to the pandemic, and this trend will continue, forcing us to spend properly. This simply adds to our conviction that the best thing you can do when buying a car is to buy something you enjoy. You’ll be spending a lot of time behind the wheel, and those miles should be as enjoyable as possible. Holding to that underlying tenet is more vital than ever now that we’ll be spending more money on our cars.
What month is the slowest for automobile sales?
Consumer spending normally goes off following the Christmas holidays, thus January and February are the quietest months for automobile sales.
Is buying a car before inflation a good idea?
If at all possible, avoid purchasing a vehicle. Used automobile inflation, on the other hand, has risen by 31.4 percent in the last year. According to Zigmont, car costs have become “a little distant from reality,” and consumers should consider if they actually need a new car right now.