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THE FINE PRINT

Now is a good time to shop for a used car

Cars for sale lined the road at a used-auto dealership in Philadelphia in September.Matt Rourke/Associated Press

If you’re looking for a used car, this could be a good time to shop.

The price of used cars and trucks have declined every month since July, with the biggest drops — by far — coming in the last three months, according to data from the Bureau of Labor Statistics.

For the whole year, prices of used cars and trucks tumbled almost 9 percent in 2022, the biggest drop in 13 years. Lower prices for used vehicles helped bring down the overall inflation rate for December, the first month-to-month decline in 15 months.

By contrast, prices of new cars and trucks have remained high, ticking up almost 6 percent last year, according to government data.

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But even with new vehicles there is a glimmer of good news in the latest government figures: In December, month-to-month prices came down for the first time in more than a year, albeit by a mere fraction of 1 percent.

“We’re seeing the first real decline in used car prices since the pandemic, which will mean more opportunities for buyers over the coming months,” said Karl Brauer, executive analyst for iSeeCars.com, a Woburn-based national car search engine.

Prices are still above pre-pandemic levels, but the downward trend in used vehicles “is undeniable at this point,” he said.

“We’re still a long way from ‘normal’ but there are clear signs the elevated prices of the past two-plus years are coming to an end,” he said.

The prices of used vehicles shot up a stunning 40 percent in 2021, mainly because a severe shortage of new cars sent a stampede of consumers looking for used ones. That new car shortage was touched off by a drastic reduction in production due to the pandemic, plus supply chain issues and a shortage of semiconductor chips.

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If you’re shopping for a car, here are some things to know:

New cars were delivered to a dealer in Pittsburgh in September.Gene J. Puskar/Associated Press

Q. How much less expensive are used cars today in dollars?

A. I have seen a wide range of quotes online for the average price of a used car, due to varying methodologies used by analysts. But I think $30,000 is a reasonable consensus estimate. Likewise, there is significant variation among analysts on how much lower prices are now compared to last year. The one I am using — 8.8 percent — is from the Bureau of Labor Statistics. Using these numbers, the price of a used car today is about $2,900 less than a year ago.

Q. How much more expensive are new cars today in dollars?

A. I think $45,500 is a good consensus estimate of the average price of a new car today, about $2,500 more than a year ago, based on the Bureau of Labor Statistics data.

Q. Should I wait to buy a used vehicle in the hopes prices will drop even further?

A. That’s a hard call to make. There’s a lot of data and analysis online. J.P. Morgan Research, for example, said in a November report that prices on used cars “are expected” to drop as much as 20 percent in 2023.

The Manheim Used Vehicle Value Index, based on the wholesale prices dealers pay at auction, said prices dropped a record 14.9 percent last year, and forecasts a 4.3 percent decline this year. That suggests a possible further drop in prices, because retail prices generally decline along with wholesale prices.

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Q. Are prices on new vehicles expected to go down?

A. Prices are closely tied to inventory and Cox Automotive said this month that new-car inventory increased more than 10 percent in December, compared to the previous month, due to both increased production and flat sales. “Some automakers may be forced to bring back incentives to spur sluggish sales and draw down supply,” Cox said.

Q. Is auto production up?

A. Yes, domestic auto production was up almost 25 percent in the second half of 2022, compared to the same period a year earlier, according to the Federal Reserve Economic Data. But even with that boost, auto production is still off by almost 30 percent compared to pre-pandemic. As production continues to ramp up, it’s reasonable to expect new vehicle prices to stay flat or even go down.

Q. Have inventory and supply chain issues been resolved?

A. Few analysts are brimming with optimism. “Although the chip shortage and supply bottlenecks have begun to ease, semiconductor and supply chain issues are unlikely to be resolved in the near-term and are expected to continue to affect production in 2023,” according to alvarezandmarsal.com.

Q. What effect do higher interest rates have on auto sales?

A. Higher interest rates on auto loans usually act as a drag on sales because consumers are unwilling or unable to take on more expensive loans. As the fed has pushed up the federal funds rate in an effort to curb decades-high inflation since last spring, auto loans have become more expensive. As of last week, the average interest rate on a 60-month loan for a new car was 6.17 percent, compared to 5.63 percent three months ago, according to Bankrate.com. On average, drivers are spending over $700 a month for a new car loan and $500 monthly on a loan for a used vehicle, Bankrate.com says.

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Workers assembled the 2022 Ford F-150 Lightning, in production at the Dearborn Truck Plant in Dearborn, Mich., last January.BRITTANY GREESON/NYT

Q. When is the best time of year to shop for a car?

A. One strategy for getting the best deal is to shop at the end of the year, quarter, or month, because salespeople and managers may be focused on hitting sales goals that trigger bonuses, according to the website Bankrate.com.

Dealerships are also incentivized to make deals when new-year models are about to be released by manufacturers, which usually happens in the fall, but there are exceptions. (If you have a particular model in mind, read up online for release dates.)

Q. What about big sales on Presidents Day weekend?

A. Automakers historically have offered better-than-average cash rebates and other incentives on national holiday weekends, with Presidents Day, which is Feb. 20 this year, at the top of the list, according to CarFax.com.

Q. What should I do to prepare for shopping for a car?

A. If you find a used vehicle, you want make sure to check the vehicle’s accident and repair history, which can be easily obtained for free from CARFAX and other companies. You can obtain an estimated value of the vehicle from Kelley Blue Book.

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Q. Will I get less for my trade-in now that used car prices are going down?

A. Yes, in a widely quoted report, Edmunds.com says the average trade-in value in December was down nearly $3,000, or 11 percent, to $22,605, since its record high in June.

Q. Anything else?

A. Spend some time online hopping around the websites of dealerships. Check out online dealerships like Carvana.com and Carmax.com, too. If you are shopping at dealerships, a good strategy is to get a firm price from one and see if the others will beat it, moving from one dealership to the next until they will go no further in beating their competitors. It may also enhance your bargaining position to be prequalified for an auto loan in an amount at least as high as the price of the vehicle you are shopping for.


Got a problem? Send your consumer issue to sean.murphy@globe.com. Follow him on Twitter @spmurphyboston.