If you’re in the market for a new or used car, you’ve probably noticed higher prices for the same makes and models from just a few years ago.
At the end of 2021, the average monthly car payment rose to an all-time high of $636 for new cars, according to Edmunds. That’s up nearly 10% from the $581 average payment in 2020.
Used car prices also went up to $520 in 2021, up from an average of $437 during the same period in 2020.
What’s behind these higher prices, and what can you do to save money now?
Look at a car dealership lot right now. Notice anything missing? Cars.
The short supply of new vehicles is due to an ongoing shortage of computer chips used to control electronics in modern cars and trucks, on top of shortages dating back to auto factory shutdowns in 2020 due to the coronavirus pandemic.
Nearing the end of summer, the available supply of new vehicles was down 73%, or around 2.5 million vehicles (that weren’t built and sent to dealers), vs. pre-Covid 2019 days, according to Cox Automotive.
The two factors above create a supply issue for car dealerships as new cars are not available to put on lots. Dealers have a limited number of new cars for purchase from inventory before the pandemic and the small number coming out of factories.
Supply may be low, but demand for new cars is still high. When much of the country went into lockdown in 2020, people put off making big purchases, such as automobiles. Why buy a car when you’re staying at home?
When areas started to reopen, people got out of their homes and flocked to car dealerships.
In 2021, millions got new jobs — and a higher paycheck. Millions more who were working from home returned to the office, feeding the need for vehicles. New car sales to American consumers set a record by topping 7 million vehicles in the first half of 2021, according to JD Power.
The low supply and high demand have resulted in higher car prices. Manufacturers know that cars will sell, so they’ve decreased or eliminated dealer incentives. That means fewer 0% APR deals, big cuts in rebates, and higher lease prices across much of the U.S.
The average purchase price for cars in 2021 was $45,000. By contrast, before the pandemic, the average price of a new car was around $37,000 in 2019.
These dynamics have also affected the used car market. Consumers who don’t want to pay the higher prices of new cars have turned to the used car lots. Again, that attention has driven up demand and raised prices on used vehicles.
Car manufacturers have ramped up production and are racing to put more vehicles on lots. The supply side will even itself out, with some analysts predicting better inventories by the end of 2022. That should, theoretically, drive down prices some and bring back incentives. If you don’t need a new car right now, your best bet may be to wait a few more months.
But even if you are not going to be driving a new set of wheels right now, you can still use your current car or truck to do something almost as exciting — save you money. If you’re stuck with an unfavorable interest rate on your auto loan and paying too much for your car, you may be able to benefit by refinancing now.
At La Cap, we’ll help you get the most savings. We work with you to figure out the best loan options and get you the lowest rate. We also help you out with our 90-day no-payment option that can free up $1,900 on average for your immediate needs.1
Plus, we’ll also give you up to $100 for your trouble.2
Talk to us and see how you can drive away with more money with an auto refi from La Cap.
1 Loan products are available to qualified, creditworthy members. The actual rate for which you qualify will be based on your credit history, loan amount & the term of your loan. Eligible members may elect to defer payment for up to 90 days (some restrictions apply). Interest continues to accrue during deferment period. Offer is valid for transferred vehicle loans currently with other financial institutions and does not apply to vehicles currently financed through La Capitol Federal Credit Union.
2 Up to $100 incentive offer is valid for transferred vehicle loans currently with other financial institutions and does not apply to vehicles currently financed through La Capitol Federal Credit Union. Only balances of $8,000 or above qualify for a cash incentive under this offer: $50 for vehicle loans with a balance of $8,000 up to $11,999.99, $75 for vehicle loans with a balance of $12,000 up to $17,999.99 and $100 for loans with a balance of $18,000 or more. Offer valid on 2018 or newer year models.