Will SUV Prices Go Down?
Car prices have been increasing quickly over the past two to three years. Factors such as the coronavirus (COVID-19) pandemic and chip shortages have resulted in rising SUV prices. However, production has improved as we head to 2023, and chip supply issues have eased a bit. However, many people wonder if that is enough for SUV prices to go down anytime soon.
Consumer Reports may have some insights. Here’s more about SUV prices and whether their prices can go down in 2023.
Reasons for increased SUV prices in the previous years
Car prices rose over the previous years due to several issues, including the Covid-19 pandemic that stopped everything and a severe chip shortage. The ongoing Russia-Ukraine crisis has also contributed to high prices, with Ukraine being a major supplier of necessary electrical wiring. At the same time, Russia is a major supplier of nickel and palladium used to manufacture EV batteries.
According to a J.P. Morgan report, this has forced Americans to pay an average of $45,622 for new vehicles in September 2022, an increase of $3,462 compared with the previous years. This has also fueled the demand for used cars, surging their prices.
Inflationary pressure also significantly impacted the rising SUV vehicles in 2022. This has accounted for an average price rise of 42.5% from February 2020 to September 2022.
Reasons why SUV prices may go down in the coming years
Till the end of 2022, SUV prices have remained at an all-time high, but as the inflationary pressure starts to ease, there are chances that these prices will come down. MIT Management Sloan School indicates that global chain supply woes are also easing a bit, especially with the adoption of retrofitting, reworking, and reshoring, as a way to deal with chip shortages.
According to Consumer Reports, interest rates may go up as one of the measures to deal with inflation. Therefore, auto loans and leases will be costlier. Buying a new car with a lower interest rate would be more cost-effective than purchasing a used vehicle.
This settles the debate of whether to buy new or used cars in terms of inflation’s effect on them. This and the possibility of a recession in the first half of this year would drive the demand down, which may eventually result in lower prices for new vehicles. However, even though there is the possibility that prices may go down slightly, there’s no guarantee that things will go back to normality, like during the pre-covid era.
Some manufacturers have even taken drastic measures to cope with inflation. For instance, Ford plans to reduce their dealership supply by 20% and adopt factory orders from their consumers. Honda also wants to reduce their overhead and normalize their inventory. These measures may bring the prices down, but they are not guaranteed to be sustainable over the year.
So, when Is the best time to buy a vehicle at a lower price?
There’s no clear-cut period when you can buy your vehicle at a lower price, especially with the chance of having a recession that may continue into the second or third quarter of 2023. Predicting how car manufacturers will respond to the looming recession is also challenging. However, if there are chances that the supply will exceed the demand, better deals may emerge.
However, the best time to get your SUV at a reasonable price is to avoid a dealership markup and try to get your SUV at MSR Suggested Retail Price or MSRP. Some ways to buy your SUV at MSRP include looking out for add-ons, financial markups, asking for a discount, and waiting for a while before purchasing the latest car model.