We’re all tired of how hard it’s been to find an affordable vehicle in the past few years. At this point, the question to ask is not when prices of cars for sale will go down but if.
The best way to find that out is to discuss why vehicle prices aren’t dropping yet, so here are the three most likely reasons that car prices are staying high right now.
The Most Expensive Cars are Also the Most Manufactured
Because of supply chain issues and auto manufacturing warehouse closures at the beginning of the pandemic, the number of vehicles able to be made was drastically reduced until 2022.
This meant that the few cars that could be made were pre-order vehicles or more expensive – and therefore more profitable – models.
For example, Nissan reduced production of their cheapest vehicle, the Versa, by over 75% and increased production of more expensive models like the Pathfinder.
This was despite more people searching for the Versa, Kicks, and Sentra, according to the Nissan U.S. vice president of sales and regional operations Judy Wheeler.
So the price of cars for sale would increase – and stay that way – if the only cars for sale were more expensive.
Low Supply and High Demand Makes More Profit for the Auto Industry
The decrease in supply from the pandemic, with demand staying the same or increasing, led to increased vehicle prices.
Even with supply increasing and a drop in demand, the auto industry likely doesn’t want to relinquish the higher profits they enjoyed the past few years. Despite reports of economic struggles, automakers have actually had an increase in earnings during the pandemic.
As long as the market can handle the high price of vehicles, automakers and dealers will continue selling them at that cost.
The only problem the auto industry has with this plan is its sustainability.
Availability – Limited New Car Production Leads to Limited Used Car Quantity
Last but not least is the obvious: cars made new in 2020 are part of the used car market in 2023.
If the used cars for sale in the under five years old range are all high-quality, well-maintained, expensive vehicles, that raises the price of used cars.
Where used cars used to be the more affordable option, these vehicles make buying a new car a comparable investment. Some new cars are cheaper than their older versions because of limited availability and more technology in older models.
Is There Any Hope?
So is there actually any hope of a decrease in the price of cars for sale this year?
Yes, actually!
While prices for traditional gas vehicles are staying high, the cost of electric vehicles (EVs) and plug-in hybrid cars has been decreasing by over 5% each year.
Some vehicles, like the well-loved Toyota Prius, are still going strong, while new contenders from manufacturers like Tesla are aggressively cutting EV prices.
So if you’re willing to make the switch, look at electric cars for sale in your area to find less expensive vehicles.
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