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Economist predicts 2024 as ideal for new car buyers

Economist predicts 2024 as ideal for new car buyers Photo: Economist predicts 2024 as ideal for new car buyers (GettyImages)

According to Cox Automotive Chief Economist Jonathan Smoke, 2024 is expected to be the best year for consumers to purchase a new car since 2019 due to increasing vehicle supply, lower transaction prices, more deals from automakers, and easing interest rates, according to USA Today.

In 2021 and much of 2022, the supply of new vehicles hit a record low due to parts shortages, leading to increased transaction prices, with many dealers selling cars above the listed price. However, in 2023, despite improved supply, average prices for new vehicles remained high.

In November, the average price was $48,247, slightly up from October but down 1.5% from November 2022, marking a rare instance in a decade where prices didn't rise year-over-year, as per Kelley Blue Book. Meanwhile, the used vehicle market is still tight, with the average listing price in early December at $26,091, down from around $27,000 the previous year, based on Cox Automotive data.

High interest rates

High interest rates continue to challenge car affordability, with new car loan rates at 9.5% (up from 5.2% in Dec 2021) and used car loan rates at just over 14% (up from 9.3% in Dec 2021).

However, car prices may decrease in the spring as interest rates could fall, offering better buying opportunities.

Increased discounts

Smoke anticipates automakers will increase incentives on new cars, leading to greater discounts for buyers. Currently, consumers are seeing a 2% reduction from the MSRP, with expectations of this discount growing to 3% and potentially reaching the pre-pandemic average of 6% below the sticker price.

Economist predicts 2024 as ideal for new car buyersBuying a car (Photo: Getty Images)

While this trend favors consumers, it implies narrower profit margins for carmakers and dealers. Despite the rising costs of the vehicles, consumers' increased bargaining power will lead to lower prices, impacting the earnings of dealers and manufacturers.

However, Smoke notes that this doesn't necessarily mean a lack of profitability for these entities, highlighting a more favorable situation for consumers.

Positive outlook

Smoke's forecast offers comfort amidst fears of a potential recession in the last quarter of the year. He believes a recession is unlikely if the quarter concludes strongly. Observing encouraging economic indicators such as robust performances in October and November, lower gas prices, and a bullish stock market, Smoke views the year's end positively.

While not predicting a booming economy or significant growth in the auto sector, he considers this the best year for consumer growth in five years, which he considers a positive outcome.

Also, we recently wrote that Honda Motor Co. announced a recall of nearly 4.5 million vehicles worldwide, including about 2.6 million cars in the United States, because of faulty fuel pumps.