Car buyers should have an easier time finding good deals this Memorial Day weekend than last year.
Dealers are left with a glut of 2023 vehicles, leading to steeper discounts and lower interest rates than normal, auto research firm Edmunds said Wednesday. The share of '23 models available from dealers nationwide has reached 6.8%compared to 5.4% last year for 2022 models, it showed.
Faced with higher inventories, automakers and dealers are offering an average discount of $4,147 on last year's models, Edmunds said — more than double the $1,919 average for '22 models a year ago.
The promotions may provide some relief for consumers beset by the higher overall cost of car ownership, including insurance and maintenance. Those expenses rose to an average of $12,182 for new vehiclesup from $10,728 in 2022, according to AAA – putting pressure on buyers long after they've driven off the lot.
The 2022-2023 market “was one of the absolute worst times to buy a car,” says Ivan Drury, director of insights at Edmunds. “There was no inventory. People were paying high premiums and there were no incentives for them.”
As a result, many drivers stuck to their existing rides for longer. The age of the average vehicle on American roads reached a new record of 12.6 years this year, S&P Global Mobility said Wednesday.
But now, Drury said, “we're back on track.” The current wave of discounts adds to signs that the market is returning to normal after pandemic supply chain issues roiled car prices, he said.
However, the price reductions are not across the board.
For buyers who have been putting off finding their ideal vehicle — for example, an SUV with entertainment features for a large family — Memorial Day deals could be an ideal time to pull the trigger, Drury said. On the other hand, those looking for more stripped-down “point A to point B” vehicles such as '23 sedans under $35,000 could see fewer options because they are being bought up so quickly.
“We're definitely seeing a return to the old auto industry,” especially around holiday sales weekends, said Scott Kunes, chief operating officer at Kunes Auto and RV Group, which operates a network of more than 40 dealerships in the Midwest.
“This market has changed from a seller's market to a buyer's market, where not only are manufacturers incentivizing cars, but we as dealers are trying to find ways to incentivize vehicles that move faster,” he said.
Kunes said his dealers had an average of 64 days' inventory of vehicles in April 2023. This inventory metric increased to 135 days last month. As the Kunes Network tries to clear overcrowded lots, heavy discounts are piling up in two areas, he said: the Big Three cars — Ford's, General engines and Jeep maker Stellantis – and electric vehicles.
Stellantis had the largest share of '23 vehicles on lots and also the highest average discount on those models, Edmunds found. Buyers can benefit from the car manufacturer Memorial Day deal on the '23 Dodge Challenger SXT, which offers a $3,750 cash rebate. (California residents can combine that with local incentives for savings of up to $6,750.)
As for EVs, “we're having a really hard time” selling them, Kunes said demand has decreased. That's frustrating for dealers, but it could give buyers a prime opportunity to combine manufacturer and dealer rebates with federal tax credits to take advantage of some of the lowest EV prices ever seen. There are plenty of generous EVs leasing options as well, Kunes added.
In the field of used cars it is a thing of the past the days of the pandemic era while costing as much or more than new models – which had prompted some drivers to trade in two-year-old cars at low-inventory dealers for even newer, shinier wheels. Used vehicle prices fell more than almost every other category in the April Consumer Price Index. fell 6.9% between April 2023 and last monthbehind only transport services (11%) and hospital services (7.7%).
New vehicle costs have remained largely stable, falling just 0.4% year-on-year in April. In fact, when taking into account auto loan interest rates, the average monthly payment for a new vehicle rose 1.8% to $762, according to Cox Automotive.
Although the average auto loan rate improved to 10.22% last month – a nine-month low – Cox found the average transaction price rose 2.2% to $48,150, after three straight months of declines.
That's why it's critical that buyers do their homework, Drury says: Contact dealers in advance to learn about rebates and incentives, and calculate any monthly payments before you sign on the dotted line.
After the industry resolved most of the supply chain issues, he said, “now we have the parts, but the problem is the price to finance these vehicles.”
Many automakers are turning to incentivized financing to help dealers move vehicles, Kunes said. He pointed Ford's Flex Buy program, which reduces qualified buyers' monthly payments by up to 18% for the first three years and then increases them to meet the balance.
“Incentivized rates are a great thing for consumers to look for, especially in this high interest rate environment,” Kunes said. “It can save you more money over the life of the loan than maybe another model with a $1,000 discount.”
But experts warn buyers who like to change cars often: Even with the best holiday deal, that recent '23 model will still depreciate faster than a car from this year, leaving you with a low residual value at trade-in.
“If you're not someone who really drives it until the wheels fall off, don't buy that 2023,” Drury said. “You can't drive your car another 5,000 miles and the value goes up. Those days are over.”
