In July 2023, only the Mitsubishi Mirage had a mean new-car purchase price under $20,000, reported Kelley Blue Book. Consumers' interests in models with more features, as opposed to base models, is a factor causing automakers to take this action. To find out ways that consumers can economize when buying a car at a dealership, a few basic steps can be taken.
Auto specialists are indicating that it is becoming more difficult to locate affordable new cars. July's average transaction price for Mitsubishi Mirage was the only model to dip below $20,000, distinctly different from the data collected five years ago where twelve vehicles shared this same criteria. Brian Moody, Executive Editor for Kelley Blue Book, describes the $20,000 mark as an unofficial benchmark for a reasonably priced new vehicle. He stated, "There aren't as many inexpensive new cars as there used to be."
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The transaction price may not be indicative of the whole picture, experts explained. The cost to the consumer is variable, as it is dependent on multiple factors such as dealer markups and bonuses, as well as any other features added in at the time of purchase. Manufacturers like Kia, Hyundai, Nissan, and Mitsubishi are still offering cars with base prices below $20,000, according to Moody. However, this selection of affordable models has become less available in the past five years, noted Tom McParland, owner of Automatch Consulting, a car-buying service. He stated that "whether you're buying new or used, vehicles that come in at a sub-$20,000 price point are increasingly difficult to find today."
Entry-level vehicles with a starting price of $15,000 were commonplace just a few years ago, according to Paul Waatti, an analyst from market research firm AutoPacific. Numerous elements are in play as to why these selections are now limited, said experts. Consumers tend to crave models with more features, Waatti explained, "culturally, Americans don't like not having features in their car," as noted by Joseph Yoon, a consumer insights analyst from car website Edmunds. The auto manufacturers are well aware of this preference and they exploit it for marketing, according to Waatti. He said, "Automakers obviously want to be able to tell that they're offering an affordable vehicle and they can do that in messaging. But when it comes down to it, they're not building many of those lower-price models."
Rather than creating more of the most affordable cars, Yoon reports that car sales in the luxury market have risen significantly over the past few years. Data from Kelley Blue Book shows that five years ago there were 12 cars with an average price of $100,000 and now, excluding super exotics, there are 32. Inflation during the pandemic has caused an increase in production costs, which have been in part passed on to consumers and have contributed to a rise in average purchasing prices - up to roughly $48,000 from $30,000 in 2012. Additionally, experts suspect that higher interest rates have kept some buyers away from the market, leading to an average purchase cost that is higher than it would be otherwise.
McParland recommends consumers begin their car shopping process by using an online auto loan calculator to determine their overall budget before committing. This calculator allows shoppers to work back from a pre-determined monthly payment, as well as specifying the loan's term and interest rate, to reveal the total vehicle price that a buyer is able to afford. “This is probably the best step any customer can take”, McParland said.
Step outside your locality during your search for a car to gain greater inventory choices and more bargaining power with dealers, recommended McParland. "Some areas are better than others," he advised, "so stretching your search even a couple of hours away should give you a more successful deal." Beforehand, be sure to get the car prices in writing from the dealer, McParland cautioned, which is a sign of potentially being taken advantage of if they refuse. "It's a signal that they are going to try to swindle you," he said. Also, do not just take the dealer's loan offer. They may try to add extra profits by giving you a higher interest rate than you need. This makes it advantageous to get pre-approved for an auto loan from your bank, credit union or online lender before entering the lot, and is especially helpful if your credit score is below 700, as you are unlikely to get the best rate. McParland stated this will provide leverage for a discounted rate.
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