Should you buy a new car in 2023?

A person leans out of the passenger side window of a red car, smiling.

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New car prices may remain higher than normal in 2023.

the main points

  • If your car has reached the end of its life, you can consider buying a new car in 2023.
  • Chip shortages, less inventory, and higher interest rates caused drivers to spend more money on new cars.
  • Based on recent Average New Car Prices data, you may still struggle to get a good deal on a new car in the coming months.

The past year was not the best time to buy a car. New and used cars are more expensive than they have been in years past, which can make it hard to get a good deal. The lack of chips has been one of the many factors driving up car prices since the pandemic began. As we head into the new year, you may be wondering if you’ll have better luck buying a reliable car at an affordable price. Keep reading to find out if you should buy a new car in 2023.

The average new car price rose in November

According to Kelley Blue Book, the average price of a new car sold in November 2022 was $48,681. This price was $422 higher than in October and $2,250 higher than a year ago. Spending close to $50,000 on a car would greatly affect anyone’s personal finance situation. With these numbers in mind, it’s not easy to feel optimistic about your next year’s car purchase.

Here’s why car prices are still going up

Many factors have led to an increase in car prices. Here are some of the reasons why it costs more to buy a car now:

  • Chip shortages continue to affect car prices: During the early days of the COVID-19 pandemic, auto manufacturers slowed production and canceled orders for microchips. Many modern cars require these chips. Unfortunately, chip production is still not at pre-pandemic levels, which is affecting vehicle inventory levels and driving up prices.
  • The demand for cars is rising: While demand for vehicles was low at the start of the pandemic, this is no longer the case. Many drivers are looking to replace their existing vehicles, so more people are struggling to buy from limited inventory. Competing with a buyer willing to pay more than the manufacturer’s suggested retail price can be difficult if you’re on a tight budget, and you may have to wait for a car to become available.
  • Interest rates are going up: It’s no secret that interest rates are on the rise. While this is a win for high-yield savings accounts, it’s not a win if you need to get a car loan. Mortgage interest rates and car loan interest rates are much higher than they have been in years past. If you plan to finance a car, don’t forget to consider how higher interest rates will affect your monthly payment and total loan cost.

Don’t rush to buy a new car

If you’re wondering if 2023 will be a better year to buy a car, you’re not alone. As for whether prices will drop next year, we will have to wait and see. However, when looking at recent car pricing data, car prices may continue to be higher than normal for some time.

If you’re not in a rush to buy a new car, you may want to hold off for a few more months until we know more about vehicle inventory levels and chip availability as 2023 progresses. Setting aside extra money in a savings account can help you better prepare for these future expenses.

Monitoring auto loan rates isn’t a bad idea, so you know what to expect and can calculate how increased interest rates might affect your new car payments. Car insurance rates have also gone up, so reviewing these costs before buying a new car is also a good practice.

If you don’t have a lot of flexibility and need to replace your car soon, do a lot of research first. It can be difficult to land a bargain on a brand new car, but you may be able to avoid overspending if you search carefully.

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