Car market could be boring in 2024. That’s good.
Car market could be boring in 2024. That’s good.
One big driver of inflation over the last few years was cars, new and used. Prices for all kinds of vehicles spiked coming out of the initial year of COVID lockdowns — driven by high demand from consumers with extra money to spend and low supply worsened by the semiconductor shortage.
But 2023 was the year the car market finally started to even out again. Dealer lots are fuller now and prices are no longer climbing at a breakneck pace.
Many folks who watch the car industry predict that trend will continue in 2024. They think next year could even be kinda boring for the business.
Something in the car market pretty much disappeared in the last few years, said Patrick Olsen, editor-in-chief at Carfax.
“In the before-inflation times, there was a fair number of 0% interest offers,” he said.
Zero money down, cash rebates — you’ve heard the ads. But dealers haven’t needed to offer those in a while.
“They’ve enjoyed, in the last two, three years, record high margins on new vehicles because of the chip shortage and COVID supply lines,” Olsen said.
Cars were scarce, so dealerships could raise prices and car buyers had to take what they could get. That’s finally changing, said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions.
“Manufacturers have found better supply of semiconductors, better supply of general parts,” he said.
That’s led to more cars and trucks rolling off assembly lines, higher inventory on dealership lots and stronger competition among dealers.
“We’re getting back to the level where a consumer can walk into a dealership and pick out a vehicle and negotiate a price, take $1,000, $2,000, $3,000 off the price and drive away that day,” Fiorani said.
Still, making a car isn’t getting any cheaper. The cost of parts and labor will likely stay high next year, and for manufacturers and dealers, that means profit margin compression, said Mark Schirmer with Cox Automotive.
“Dealers will still be able to stay in business and certainly be profitable. They just won’t be as profitable as they were in 2021 and 2022,” he said.
So, in a lot of ways, the car market of 2024 could look a lot like it did before 2020. Which is to say, pretty normal.
Unless…
“If any part of the supply chain broke, then suddenly there’s no production or less production. That would throw this whole thing into a tailspin again,” said Fiorani at AutoForecast Solutions.
So, maybe grab that discount while you can.
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