- Low supply and high demand have led to an increase in car prices.
- Though car prices may decline as the year moves on, they might still remain high throughout 2022.
It's gotten very expensive to own a vehicle, but will that hold true for the entire year?
It's fair to say right now is a difficult time to buy a car. In December, consumers paid an average $45,283 for a new car, according to J.D. Power. Back in July, that average sat at $41,044.
A big reason car prices have been up so much is that supply has been limited and demand has been higher. This holds true for both new and used vehicles.
Many people have grown less comfortable taking public transportation during the pandemic, and have sought to buy vehicles of their own. But chip and other parts shortages have limited the supply of available vehicles, forcing buyers to pay up.
If you need a car, you may be wondering if it pays to sit tight and wait for prices to drop. But the truth is, we don't know to what extent prices will come down in 2022, if that happens at all.
Until production is able to ramp up significantly, car prices are likely to remain high, and while things might improve as the year moves along, we're unlikely to see a notable downtick in vehicle prices in the near term. If you can't afford to wait for months to buy a car, here are some tips to afford one at today's prices.
1. Do your research
Before you start test-driving vehicles, make a list of the things you're looking for in a car, and then do your research to see which models check off the right boxes at the most affordable price points. Then, once you've narrowed down your choices, shop around for the same models at different dealerships. It's not unheard of for one dealer to offer the same car as another for a lower price.
2. Opt for a used vehicle
Although used car prices are up, you'll still generally spend a lot less on a used vehicle than a new one. And while new vehicles offer protection in the form of warranties, you may be able to purchase or obtain a limited warranty for a used car as well.
3. Skip the bells and whistles
When car manufacturers advertise new models, they tend to present their prices in "starting at" form. That's because the price you see quoted will often apply to the basic model of a given vehicle -- not the updated version with the fancy features that appeal to the masses.
But tempting as it may be to pay for those upgrades, try to limit yourself. If you go overboard on upgrades, you might end up with an auto loan payment you really can't afford.
Keep in mind, too, the more fancy and expensive a car you purchase, the more you're likely to pay for auto insurance. Those hefty premiums could make your vehicle really difficult to keep up with.
There's no getting around it -- right now is a difficult time to purchase a car, whether you're looking at a used model or one that's never left the lot. But it's important not to go overboard on a car purchase so you don't wind up falling behind on your auto loan or racking up other debt. There's a good chance car prices will start to drop as supply chains catch up to consumer demand, but since that may not happen for many months, the best thing you can do right now is research your options and choose your vehicle judiciously if waiting to buy isn't possible.
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