For deal-focused car shoppers, the next few months likely present a limited window to score significant savings compared to delaying their purchase further into 2024. As the year wraps up, seasonal discounts multiply while market factors align to incentivize buyers who act decisively before 2023 concludes.
Bigger Discounts Arrive Late Each Year
Industry analysts highlight December as the most opportune month for car buyers prioritizing value. As calendar year sales wrap up, dealerships often experience reduced customer foot traffic. This leads them to push discounts aggressively to hit annual sales targets. Concurrently, manufacturers ramp up consumer cash offers, cut financing rates, and provide substantial rebates to keep inventory moving swiftly off lots during the last weeks of December.
Kelly Blue Book reports average discounts ranging from $3,500 on compact cars up to $6,000 or more on popular SUV and truck models. Compared to other months, additional savings typically rise between 10-30% higher in the final month of the year. With less buyers walking the lot, dealers also tend to negotiate prices more flexibly during this period. This allows savvy shoppers willing to run the numbers to stack significant savings by combining national manufacturer deals with lower dealer asking prices.
Seasonal Year-End Discounts
| Month | Average Savings | % Above Avg Discount |
|---|---|---|
| January | $2,200 | -18% |
| February | $2,000 | -25% |
| November | $2,800 | -5% |
| December | $3,500 | Peak |
These recurring seasonal trends play out annually as both dealer and manufacturer financials place emphasis on closing the year out strong. For dealers in particular, tax benefits from entirely selling down excess vehicle stocks before December 31st gives them further motivation to trim prices aggression. By wholesale reducing inventories, they can notably lower their overall tax liability while simultaneously heading into the new year with less outstanding floorplan costs on the books.
Interest Rates Could Stay High in 2024
While noteworthy savings start stacking up on discounted car prices during the 2023 closeout period, acting before next January also allows buyers to secure better loan terms over the entire lifespan of their next vehicle purchase. Current forecasts suggest interest rates are likely to remain elevated well into 2024 and perhaps beyond as the Federal Reserve keeps their benchmark rate high in its ongoing battle to tame inflation.
In a recent interview, Bankrate‘s Chief Financial Analyst Greg McBride warned of further impacts to auto loans ahead: “My expectation is that auto loan rates that are north of 6% could very well be the norm in 2024 if we continue to see hotter-than-expected inflation readings in the coming months.” That projection contrasts notably with the 4-5% average peak most new car buyers have seen in periods of strong economic expansion.
Auto Loan Rate Outlook
| Year | Fed Funds Rate | Est Auto Loan Rate | Interest Paid (5 Yr Loan) | Savings vs 2024 |
|---|---|---|---|---|
| 2022 | 2.5% | 4% | $2,000 | -$1,250 |
| 2023 | 4.5% (Current) | 5.5% | $3,100 | -$150 |
| 2024 | 5%+ | 6%+ | $3,250 | – |
By moving forward with an auto loan application now rather than waiting until 2024 or beyond, buyers could stand to save $150 or more in interest payments over the course of a typical 5-year financing term while also locking in a competitive rate ahead of further hikes.
Wait Until 2024 for Best Used Car Buys
The used vehicle marketplace follows markedly different supply and demand cycles relative to brand new autos rolling straight off the production line. During tax season, January through April timeframe, we often observe a spike in used car pricing as tax refund checks flooding into consumers hands creates heightened demand during this relatively short period that then recedes post-April.
Historical data compiled by the car search site iSeeCars clearly displays this seasonality trend, with gently used 1-5 year old vehicles hitting their highest asking prices in March and April, peaking 8-10% above the annual lows typically found during the late summer and fall months.
For buyers with some flexibility on timing not needing to urgently purchase a used vehicle, holding out until 2024 is likely to yield better results. Demand spikes from tax season and annual income tax dynamics will no longer artificially inflate costs next year at this time. Additionally, analysts anticipate used car and truck supply to steadily rise moving into 2024 as new car sales rebound, spurring higher trade-in volumes. Waiting until the mid-2024 timeframe could reward used buyers with moderately better selection and incrementally increased leverage.
New Vehicle Inventory Recovering in 2023
Alternatively, new vehicle shoppers stand likely to benefit by pulling the trigger sooner on a purchase while macro supply conditions stage what looks to be a multi-year recovery heading into 2023. The pandemic-induced global chip and component shortage severely hampered auto manufacturing output over the past 24+ months. The resulting production cuts sharply limited new inventory vehicles landing on dealership showroom floors.
However, with broader underlying chip and component pipelines showing signs of improving stability, industry analysts like Cox Automotive now project 2023 will see dealers regaining access to fresh allocation likely to help new vehicle inventories recover by upwards of 1 million additional units next year. This incremental capacity promises to be welcome relief for the auto industry after years of short supply and inflated new car prices soaring to record highs amid scarce inventory.
While the rebalancing act remains very much a gradual process, new car intenders should discover markedly better selection opportunities late in 2023 as compared to the extremely thin inventories dealers were forced to carry for most of the last 18 months. Those expanding stocks unlocked by improving component access will support turning the negotiation tables back in favor of new car shoppers for the first time in years.
Inflationary Pressures Also Impact New Car Prices
Reviewing historical new car pricing data reveals a compelling trend – when the Federal Reserve raises interest rates to combat economic overheating and inflation, new vehicle prices tend follow suit with noteworthy increases. 2022 saw the Fed‘s most aggressive policy tightening actions in over 40 years, employing substantial rate hikes in their fight against 40-year high inflation. The table below outlines new car prices in relation to key monetary policy moves since 2018:
New Car Prices and Fed Actions
| Year | Fed Funds Rate | Avg New Car Price | % Price Change |
|---|---|---|---|
| 2018 | 2.25% | $35,850 | +1.2% |
| 2019 | 1.75% | $36,670 | +2.3% |
| 2020 | 0.25% | $38,646 | +5.4% |
| 2021 | 0.25% | $45,597 | +18% |
| 2022 | 4.25% (Current) | $48,301 | +6% |
Reviewing the data shows a direct relationship between Fed rate moves and new vehicle pricing – years with interest rate cuts experiencebelow average price hikes, while years with significant hikes like 2021 and 2022 recorded the largest price inflation.
This analysis indicates rising rates from the Fed in 2023 and 2024 are likely to spur continued new auto price escalation making discounts and savings in the near term more valuable.
Optimize Timing to Maximize Car Shopper Savings
For all the talk of a forthcoming “car buyer’s market” returning at some future point, the extreme pricing and inventory fluctuations observed over the past three years clearly demonstrated just how much uncertainty still exists attempting to forecast the auto industry. As the Fed aims to slow consumer demand into 2024 and manufacturers work to carefully rebuild profit margins, most economists and analysts hesitate to guarantee reduced new or used car prices over any long-term duration.
This reality means car shoppers focused on minimizing expenses hold the advantage by acting swiftly and decisively to capitalize on short-term savings opportunities when they emerge. As 2022 comes to a close, several key market indicators have aligned favorably for buyers who prioritize value and can operate with a bit of urgency. These conditions will inevitably shift as the calendar flips to 2024 so time-sensitive savings windows will close quickly.
Savvy car purchasing strategists stand likely to save upwards of $3,000 – $4,000 on their next car or truck by focusing their efforts sharply before this year concludes based on all the data we have reviewed. Compelling discounts and alluring incentives on both used and new vehicles could certainly continue as supply dynamics incrementally improve moving into 2023. However, the unique combination of amplified rebates and multilayered savings opportunities timed annually for December represent unequivocally the deals unmatched at any other point each year. When also considering interest rates and pricing risks skewing higher into 2024, today’s short-lived car buyer incentive period will be exceedingly difficult to replicate again anytime in the foreseeable future.