New Car Inventory Is Improving — But Buyers Shouldn’t Expect Fair Pricing

Key Takeaways:

• Automakers across the nation are bouncing back from supply chain shortages and low shipments of new car inventory.
• The Federal Reserve significantly increased interest loan rates (up to 3.25%) to combat growing inflation concerns.
• Despite new car inventory showing progress, the cost of financing a new car is much higher than months prior.

Is new car inventory improving?

Good news for hopeful car buyers in 2022 — the automotive market is finally starting to recover from the pandemic-induced shortages. After what seems like years of limited supply, recent reports have shown that change is slowly on the horizon. According to BofA Securities, the total automotive inventory increased to 1.43 million units at the end of September 2022. This marked the highest influx of new car inventory since May 2021.

The increase sheds new light on the perplexed state of the automotive industry. However, the reality still remains that car shoppers are pitted against all odds when it comes to new car purchases. And especially, when it comes to financing. In the past year, depleted inventories and consistent demands have resulted in an unfavorable buyer’s scenario.

Anyone who was willing or able to purchase a new car in 2022 surely paid over MSRP. Or worse, purchased a new vehicle above asking price and without customary features, like in-car navigation, heated seating, and infotainment touchscreens. The evident seller’s market left little room for consumers to snag a deal in 2022. And now, it looks like not much will change.

While a return to normalcy is received with open arms, it doesn’t change the fact that Americans will feel the weight of pricey interest rates no matter where they opt to shop.

New car inventory price spikes show no sign of stopping

While we can’t help but acknowledge that more inventory is a good thing, major challenges still lie ahead for new and used car buyers. The Federal Reserve recently hiked up interest rates in an eager attempt to fight mounting inflation. As things go, this sudden increase has already started to have an effect on consumers’ wallets and the number of new car purchases per diem.

Since inflation has impacted nearly every industry this year, the automotive industry is no different. Drivers are already feeling the tight-squeeze financially in a number of ways. But now, the higher cost to finance will likely deter or inhibit a portion of buyers from a making a legitimate deal. Which means, although new car inventory is on the rise, the demand is sure to decline in the months to come.

What car companies have the most inventory right now?

Namesakes like Honda, Toyota, Mazda, and Volvo make up the handful of automakers who have diligently dodged the dire effects of the semi-conductor chip shortage. While reports show that new car inventory is increasing across the board, these carmakers offer the widest selection of options at this point in time. In the months to follow, particularly by early 2023, we expect more automakers to have even levels of inventory on their lots. Or at least something more comparable to pre-pandemic days.

What to expect in 2023

A return to pre-pandemic times may be out of the question, at least for now. As consumers grapple with the quarterly price spikes and elevated interest rates, automakers are racking in the profits without difficulty. For those reasons, a majority of automakers have shifted their focus towards more profitable models that cash in the biggest return.

As automakers profit, the modern consumer is taking the biggest hit as a result. Even though the rise in new car inventory shows promise for the automotive market, the interest rates will inevitably hold buyers back from feeling fully content with a new car purchase. What good is it to have more inventory if you wind up paying more?

All in all, whether consumer demand begins to decrease significantly is to be determined. One thing we do know going forward is that more inventory does not indicate better deals. As holiday season quickly approaches, one can only hope that carmakers will make a better initiative to get buyers back in their stores and behind the wheel of a new car.