How to Buy a New Car in Today’s Challenging Market
The new-car shortage may slow this year, but prices remain high and availability limited
By Benjamin Preston
Ever so slowly, new-car dealers are starting to show a few more vehicles on their lots. And because of a variety of factors—inflation, high fuel prices, a year’s worth of new-car scarcity—demand for cars has begun to cool off a bit. But new-car availability is still near record lows, and those who find themselves in the position of having to buy a new car are often paying thousands over the manufacturer’s suggested retail price.
Consumer Reports is no stranger to this phenomenon. Relying on our staff of secret buyers, we typically buy 40 to 50 new cars every year to test the most popular models and trims. But even we are struggling to keep pace. Since the beginning of 2022, we’ve sealed the deal on nearly 20 new cars—everything from the Ford Maverick Hybrid to the Jeep Grand Cherokee Limited. Often over the past year or so, we have had to pay several thousand over sticker, just like everyone else.
Even so, there are ways around the disruption.
“It’s still not a great time to buy a new car, but if you need something now, there are options,” says Gabe Shenhar, associate director of CR’s auto testing program.
According to a nationally representative survey CR conducted recently, compared with 2019, before the pandemic, more people now have been buying new cars than used. And those who have bought cars have been shelling out for more expensive ones. Throughout most of 2021 and into this year, the car buying market has posed a challenge for many consumers, forcing them to be flexible. Multiple experts say it doesn’t show signs of improving for buyers anytime soon, but if you squint really hard, you may be able to see a light at the end of the tunnel.
New cars have been in short supply for some time, mostly because of a global, pandemic-related scarcity of the microchips needed to build them. As a result, used cars are more expensive than ever. Although used-car prices have jumped more dramatically in terms of what they were worth even a year ago—the Bureau of Labor statistics says they’re 6.6 percent more expensive than last year, and more than 50 percent more expensive than they were in February 2020, just before the pandemic caused widespread economic disruption—many new cars are selling for more than their MSRP. As of last month, the Kia Telluride was selling for 20 percent over MSRP, on average, and many other models, particularly from Hyundai and Kia, were selling for 15 percent or more over sticker price.
Pat Ryan, founder and CEO of CoPilot, an app that uses pricing and other data to help consumers make informed car buying decisions, says that the extra fees dealers are charging on top of MSRP won’t last forever and that things may even begin to improve toward the end of the year.
“We started to see prices come down as early as January, but the war in Ukraine created a lot of uncertainty about supply, so dealers kept prices high,” Ryan says.
Zack Krelle, an analyst with TrueCar, a Consumer Reports partner that helps people find the best deals on cars, says that the shortages aren’t uniform, and that in general, domestic manufacturers tend to have better availability than imports on new-car lots. Getting down to the individual model level, anything that has been hotly anticipated—think the Ford Bronco or the Ford F-150 Lightning—is going to be more difficult, and more expensive, to get hold of.
“There’s still strong interest in sedans, too,” Krelle says. “Models like the Toyota Camry and Hyundai Elantra have single-digit days’ supply as consumers look for affordable, fuel-efficient options.”
CR has advice to help you navigate a market that’s tough for buyers.
Weathering the Storm
As CR’s expert buyers have found, the car you want is out there somewhere. It often comes down to having patience and being ready to buy as soon as you find something you like.
“It’s a good idea to focus on the model you want, and to know what all of your must-have options are and how much they cost,” Shenhar says. “Do your homework. Learn the difference between the dealer cost and the MSRP, and locate two or three vehicles by searching on the manufacturer’s website, or on websites like TrueCar or Cars.com, for example.”
In this market, be ready to accept that prices just aren’t as negotiable as they were a couple of years ago, if at all. If you find the car you want at a dealership that doesn’t charge over MSRP, you’ve already won half the battle.
Our main advice for buyers in this tricky market: Act quickly and negotiate from an informed perspective. That can make the difference between getting a fair deal and getting no deal.
Prearrange financing. Figure out your budget and get financing based on what you can afford to pay monthly, and as a down payment. It’s always a good idea to get financing set up through your bank or credit union before going to the dealership to look at cars because it gives you a baseline against which you can compare the terms of dealer financing, which may or may not be a good deal. Sometimes dealer financing benefits from manufacturer subsidies that allow the dealer to offer a lower interest rate than you can get from your bank. Krelle, from TrueCar, says that new-car incentives are starting to creep back onto the scene.
It’s especially important to prearrange financing now, when new cars are in such short supply. If a dealer has a car you like today, it’s probably a good idea to purchase immediately before someone else grabs it.
Don’t borrow too much. If you’re paying close to 20 percent over MSRP for a Kia Telluride today, for example, consider what it will be worth when you trade it in. For example, if you buy an SUV that depreciates $15,000 off the sticker price in three years, but you paid $10,000 over MSRP this year for it, that means it cost you $25,000 to own it for that short period. Cars are depreciating assets; overpaying for a new car is likely to compound your long-term losses.
The same goes for a used car that costs almost as much at 2 years old as it did when it was new. You don’t want to get a loan on a car that’s going to lose a lot of value over the next couple of years, or you may end up underwater on the loan, where you owe more than the car is worth for an extended period.
See what’s available. If you’re shopping for a new car, dealers near you may not have exactly what you’re looking for. Instead of going to the dealership to see what it has, look on its website or call first. You may need to search several dealers to find something that’s close to what you’re looking for.
Expand your geographic search. If dealers where you live don’t have the car you want, try sellers outside your area. Be cautious about casting your net too wide, though. You want to be able to go see the car and test drive it before signing a sales or leasing contract—especially for used cars—and with the market being as hot as it is right now, the car you’re looking at might not be there if you have to travel too far to get to it.
Do your research. Whether buying new or used, consult Consumer Reports’ road tests and ratings, looking at reliability, owner satisfaction, and safety.
You want a short list of contenders to test-drive, and even more than before, you want a good understanding of the various trim versions and features because you might not find your dream configuration at the dealership. Print material from CR.org and the manufacturer websites so that you have it with you.
Buy something reliable. If you’re forced to pay more than usual for a new car, your best bet is probably going to be to keep it for the long haul. Consult CR’s reviews and ratings to make sure you buy something reliable that won’t give you problems later on.
Compromise to a degree. Even if the dealer has the model you want, the car might not have some of the features you were looking for. Decide which options are really important and whether a vehicle not having all of them means you should consider a different car. As for price, large pickup trucks and SUVs have seen the biggest increases, while smaller cars, sedans, hatchbacks, and front-wheel drive SUVs have had smaller price hikes.
Factor in your trade-in. Upgrading to a vehicle with better fuel efficiency, more up-to-date safety features, and even just more comfort or style can be compelling reasons to buy a new car. If you have a car to trade in or sell before buying something new, you can leverage its value against the elevated price of new cars.
“Now is an excellent time to trade in or sell your old vehicle,” Krelle says. “Used vehicle values are high, and it can be a good time to trade those in, particularly if your vehicle is newer, in high in demand, or has relatively low mileage.”
More from Consumer Reports:
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Best used cars for $25,000 and less
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