Should You Buy a New Car in 2023?

New vehicle prices may still be higher than usual in 2023. 

This past year hasn't been the best time to purchase a vehicle. Both new and used cars are more expensive than in years past, making it difficult to get a good deal. Chip shortages were one of many factors that have led to higher vehicle prices since the pandemic began. As we head into the new year, you may wonder if you'll have better luck buying a reliable car at an affordable price. Keep reading to find out if you should buy a new car in 2023. 

The average new car price increased in November 

According to Kelley Blue Book, the average new car sold in Nov. 2022 cost $48,681. That price was $422 higher than in October and $2,250 higher than one year ago. Spending nearly $50,000 on a vehicle would significantly impact anyone's personal finance situation. With these numbers in mind, it isn't easy to feel optimistic about the car-buying process in the year ahead. 

Here's why car prices have continued to rise 

Many factors have led to an increase in car prices. Here are a few reasons why it now costs more to buy a car: 

• Chip shortages continue to impact car prices: During the early days of the COVID-19 pandemic, auto manufacturers slowed down production and canceled orders for microchips. Many modern cars require these chips. Unfortunately, chip production is still not at pre-pandemic levels, impacting vehicle inventory levels and increasing prices.  
• Demand for cars is up: While the demand for vehicles was low at the beginning of the pandemic, that's no longer the case. Many drivers are looking to replace their current cars, so more people are fighting to buy from the limited inventory. Competing with a buyer willing to pay well over the manufacturer's suggested retail price can be challenging if you're on a tight budget, and you may have to wait for a car to be available.  
• Interest rates are rising: It's no secret that interest rates are rising. While this is a win for high-yield savings accounts, it's not a win if you need to take out an auto loan. Mortgage interest rates and car loan interest rates are much higher than in years past. If you plan to finance a vehicle, don't forget to consider how higher interest rates will impact your monthly payment and total loan cost. 

Don't rush to buy a new vehicle

If you're wondering if 2023 will be a better year to buy a car, you're not alone. As for whether prices will decrease next year, we'll have to wait and see. However, when considering recent car pricing data, car prices may continue to be higher than usual for some time. 

If you're not in a hurry to buy a new car, you may want to hold off for a few more months until we know more about vehicle inventory levels and chip availability as 2023 progresses. Setting aside extra money in a savings account can help you better prepare for this future expense.  

It's not a bad idea to monitor auto loan rates, so you know what to expect and can calculate how rising interest rates would impact a new car payment. Car insurance rates have also increased, so reviewing these costs before buying a new vehicle is also good practice. 

If you don't have much flexibility and need to replace your car soon, do plenty of research first. It can be hard to score a winning deal on a brand-new vehicle, but you may be able to avoid overspending if you research carefully.