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Memorial Day weekend car dealership looks “pretty gloomy”

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One of the best car-shopping weekends prepandemic is more of a dud these days.

In the midst of the automotive industry’s production challenges due to persistent supply chain problems, Memorial Day sales are generally minimal to non-existent this year.

“It looks pretty bleak, to be fair,”[ads1]; said Ivan Drury, senior manager of insights for Edmunds. “It’s getting harder and harder for people to get a new car with the features they want at the price they are willing to pay.”

The average amount paid for a new car is more than $ 45,200, up 18.7% from a year ago, according to a joint forecast from JD Power and LMC Automotive. Buyers pay about $ 700 above the sticker price on average, Drury said.

At the same time, the average incentive offered by dealers has fallen to a record low of $ 1,034, compared to $ 2,996 a year ago, the JD Power / LMC forecast shows. In general, dealers do not have to offer much in the form of incentives to sell cars these days.

In fact, despite the fact that the sales rate is down 23.8% from a year ago due to reduced inventory, the average profit per car at dealers is $ 5,046 up from $ 2,733 a year ago.

It is getting harder and harder for people to get a new car with the features they want at the price they are willing to pay.

Ivan Drury

senior head of insight into Edmunds

“This increase in unit revenue more than offsets the drop in sales volume,” said Thomas King, president of JD Power’s data and analytics department, in the forecast.

Meanwhile, with limited inventory for a new vehicle, an increasing proportion of buyers are on their way to used cars instead, Drury said.

“Many new cars you look at [dealer] Websites marked ‘coming soon’ or ‘under transport’ have already been sold, “said Drury.” So unless you can pre-order the vehicle and wait three or six months for it, you’ll end up in a used car. “

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Of buyers with swaps, 45% end up with a used vehicle compared to 35% a year ago, Drury said.

Of course, there is little relief in the used car market. Average prices have risen 22.7% in the last 12 months, according to the latest data from the Bureau of Labor Statistics. Transaction amounts average $ 29,948, Edmund’s research shows.

However, this means that the exchange values ​​are also higher.

“For your own used vehicle, get more deals,” Drury said. “Take advantage of it.”

Another thing to consider is the financing costs. The average interest rate paid on new car loans is ticking upwards. It reached 4.7% in April, up from 4.5% in March and 4.1% in December, according to Edmunds. With the Federal Reserve expected to continue to raise a key interest rate affecting consumer loans, car customers are likely to encounter higher interest rates in the coming months.

However, well-qualified buyers may be able to get a decent price, depending on the car.

“You can still get zero or maybe 1.9% funding,” Drury said.

For used cars, the average rate is 8%. But for certified used cars – which have usually passed a rigorous inspection and come with an extended warranty – you can find special financing agreements.

“It could be 1.9% or 2.9% or even cashback,” Drury said.

And while used cars may cost more, you can pay a higher interest rate on a loan for a non-certified version.

“Even if you save money in advance with a non-certified used car, you may end up paying more overall,” Drury said.

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