Car shoppers should find better deals this Memorial Day weekend compared to last year.
Dealerships are experiencing an oversupply of 2023 vehicles, resulting in steeper discounts and lower interest rates than usual, according to auto research firm Edmunds. The availability of ’23 models at dealerships has increased to 6.8%, up from 5.4% for ’22 models last year.
To manage higher inventories, automakers and dealers are offering an average discount of $4,147 on last year’s models, more than double the $1,919 average for ’22 models.
These promotions provide some relief for consumers facing higher overall costs of car ownership, including insurance and maintenance, which have risen to an average of $12,182 for new vehicles, up from $10,728 in 2022, according to AAA.
“The 2022-23 market was one of the worst times to buy a vehicle,” said Ivan Drury, director of insights at Edmunds. “There was no inventory, people paid heavy premiums, and there were no incentives.” This led many drivers to hold on to their existing vehicles longer, with the average age of vehicles on U.S. roads reaching a new record of 12.6 years, according to S&P Global Mobility.
However, Drury notes that “we are back on track.” The current wave of discounting signals a return to normalcy after pandemic-related supply chain issues disrupted vehicle prices.
The price cuts aren’t universal. Memorial Day deals might be ideal for those who have waited to buy their dream vehicle, such as a family SUV with entertainment features. However, options for more basic vehicles, like ’23 sedans under $35,000, may be limited as they are being quickly purchased.
“We are seeing a return to the traditional car business,” said Scott Kunes, COO at Kunes Auto and RV Group, which operates over 40 dealerships in the Midwest. “This market has shifted from a seller’s market to a buyer’s market, with both manufacturers and dealers offering incentives to move vehicles off the lot faster.”
In April 2023, Kunes’ dealerships had an average 64-day supply of vehicles, which surged to 135 days last month. To clear out inventory, they are offering significant discounts on Big Three autos (Ford, General Motors, and Stellantis) and electric vehicles. Stellantis has the largest share of ’23 vehicles on lots and offers the deepest average discounts, including a $3,750 rebate on the ’23 Dodge Challenger SXT.
Demand for EVs has slowed, presenting buyers with opportunities to combine manufacturer and dealer discounts with federal tax credits for some of the lowest EV prices ever seen. Generous EV leasing options are also available.
Used car prices, which had soared during the pandemic, have fallen sharply, with prices dropping 6.9% from April 2023 to last month. New vehicle prices have remained relatively stable, decreasing only 0.4% year-over-year in April. However, average monthly payments for new vehicles increased by 1.8% to $762, according to Cox Automotive, due to high auto loan rates.
Although the average auto loan rate improved to 10.22% last month, Cox found that the average transaction price increased by 2.2% to $48,150. Drury advises buyers to research discounts and incentives ahead of time and calculate monthly payments before finalizing a purchase.
To help move vehicles, many automakers are offering incentivized financing. Ford’s Flex Buy program, for example, lowers monthly payments by up to 18% for the first three years before increasing them to satisfy the balance. Incentivized rates can save consumers more money over the loan term than a rebate.
However, experts warn that even with a great holiday deal, a ’23 model will still depreciate faster than a current-year car, affecting its trade-in value.
