Anyone who has been to a dealership or read what people say on social media about the prices of new cars knows how expensive it is to buy a new Ford, Chevy, Dodge, or any other new vehicle. Because of the epidemic and the problems it caused in the supply chain, vehicle stocks have been out of whack for almost three years. When you think about inflation, rising gas prices, and significant increases in interest rates, it seems like the world will go into a depression. But the latest BLS CPI report and inventory figures show that prices may begin to fall, and companies like Tesla are already adjusting. According to the most recent CPI report, between November 2021 and November 2022, the CPI for total spending went up by 6.6%. But by December 2022, the index had slowed by 0.1%. Even though it might not seem like a significant change, it includes spending on food, electricity, new and used homes and cars, and everything else. Also, the 12-month gain in December was the smallest since October 2021. The CPI increase was also the smallest since November 2022, when they made seasonal adjustments. Having to pay more at home and less at the gas station Our spending has gone up mainly because energy costs have increased. According to CPI data, the cost of all types of energy went up by 7.5% in June 2022, while the cost of all kinds of gasoline went up by 11.2%. The study found that this increase was the biggest reason for the rise. But by December, the CPI for gasoline had gone down by 9.4%, and the total energy cost had gone down by 4.5%. Still, there were other significant changes we’d seen at the pump. In June, growth was at its highest point, at 11.2%. In July, growth dropped by 7.7%; in August, it dropped even more to 10.6%. In the fiscal year that ended in December 2022, our total fuel costs went down by 1.5%. The price of not all fuels has gone down. Over the past year, fuel oil prices went up 41.5 percent, the electricity went up 14.3 percent, and piped-in utility gas service went up 19.3 percent. These factors led to a 7.3 percent increase in the energy index. So, even though the price of gas has gone down, our overall energy use has gone up, even though the cost of powering everything else has gone down. The overall expenditure on food during the past 12 months increased by 10.4%. However, the rate of increase dropped from 1% in July 2022 to 0.3% in December 2022. Our spending went up mainly because we bought more food for our homes. Our spending went up by a high of 1.3% in July and a low of 0.2% in December. Compared to October, consumer spending at restaurants went up by 0.9% in August. It stayed the same until November when it started to go down, first by 0.5% and then by 0.4% by December. The BLS did not consider seasonal changes between each month when adjusting the “Food Away from Home” category in this CPI report. In a press conference on Thursday, President Biden praised the Inflation Reduction Act. “It all adds up to a genuine break for consumers, a breath of fresh air for families, and more evidence that my economic plan is working,” he said. Lessening rate hikes Another good thing is that buyers who can get new loans for big purchases will get lower interest rates. The Federal Reserve has said that rate hikes have slowed in December and that there may be some rate cuts in February, perhaps by as little as 25 basis points at a time, as inflation worries continue to fade. In a speech on Thursday, Patrick Harker, president of the Philadelphia Federal Reserve, said, “Though I don’t believe we will be able to do so again, I do believe we will be able to do so a couple more times this year. I believe future rate increases of 25 basis points will be acceptable.” Jessica Caldwell, senior director of insights at Edmunds, says that rate hikes are another thing that could cause a drop in sales of new cars. She stated, “Low-interest rates have made it possible for folks to buy the huge cars Americans prefer for more than a decade.” It is difficult for anyone to purchase a vehicle at this time due to the increased interest rates. How much money it takes to keep a car running Car buyers like it when gas prices go down and interest rates don’t increase as often. The CPI report, however, shows that price increases for new cars have slowed down a lot. The price of a new vehicle went up by 5.9% from one year to the next, but the rate of increase has slowed. The CPI says that the price of used cars has increased even more. In June, prices for used cars were 1.6% higher than in May, but this didn’t last long. In the last 12 months covered by the CPI, a used car’s price has decreased by 8.8%. People who wish to replace their worn-out wheels but either do not have enough money or are in the lower middle class will find this very encouraging news. Fuel prices are not the only thing affecting a new car’s price Even though the price is still higher than the previous 12-month CPI period, the drop is good news and a sign that problems with the supply chain and semiconductors are finally improving. Cars.com says that the number of new cars a dealer has in stock and the length of time a new vehicle stays on the lot are both going up. Forty-seven percent of new cars on dealer lots are sold in 10 days. In March 2022, that number was 57 percent. This also means that the average time a new vehicle spends on a dealer’s lot has gone from 18 days in 2021 to 23 days. Even though Cars.com’s dealer network had more cars for sale, the median price of all new vehicles was $41,000, up 6% from $38,800 the month before. In an email, Sam Fiorani of AutoForecast Solutions told Cars.com that prices should start going down in 2023 because there will be more cars on the market. According to him, prices should start going down in 2023 because there will be more supply and less demand. “Dealerships were able to sell at or above MSRP because there was consistent demand for new cars and limited supply,” he explained. On the other hand, Cox Automotive and its network of car dealers say that the number of cars in stock has increased from 1.62 million in November to 1.8 million. According to their report, merchants have enough inventory to last for 58 days, which is 65 percent more than in December 2021. (It is normal and best to have enough for 60 days.) Compared to a year ago, the average price of a listing has gone up to $47,662, but sales have only gone up by 2%. Charlie Chesbrough, a senior economist at Cox Automotive, says that if this trend keeps going, automakers will be under a lot of pressure to move more metal with more enormous incentives. “Automakers going back to sales will be a big story in the first half of 2023,” but this could already be happening. Tesla has already cut the prices of its once-popular Model 3 sedan and Model Y Performance SUV. In the spring of 2017, 80% of buyers paid more than the MSRP, which was $700. In December 2022, only 36% of people who bought a new car could negotiate a lower price. Those who did save an average of $300 off MSRP. Even though incentives are much lower than they were a few years ago, customers saved an average of $2,600 off MSRP in 2019. Even though it takes time, the drop in car prices is ending.
