New car prices may fall, but don’t expect much lower

New car prices may end up declining in the coming months, but don't expect to pay much less on a monthly basis due to higher interest rates.

According to a note to clients on Monday, "To our clients who refused to pay above the sticker for a new car, your patience is about to pay off," wrote Adam Jonas, chief auto analyst at Morgan Stanley. Jonas said that deflation may finally be arriving for new car prices due to stalling sales and a 17 month high in vehicle supplies.

In the coming quarters, power predicted that less list prices could come due to rising interest rates, higher vehicle availability and worsening economic conditions that are likely to affect overall demand.

According to J.D. In September, the average transaction price was expected to reach $45,622, a record for the month, a 6.3% increase from a year ago and the fourth highest of any month on record. August set the record, with prices hitting $46,259, J.D. Power said something.

The lower list prices would come at a time when interest rates to borrow for car purchases are at levels not seen in 15 years - nearly 6% on average.

According to Cox Automotive, lower income and lower credit quality buyers are being eliminated from the market, while luxury buyers will remain.

In a note released Monday, Cox chief economist Jonathan Smoke said that new cars may finally be available when most Americans can no longer afford them.

Car shoppers may want to look at the used market, where dealers just saw the biggest drop in prices at auction since the pandemic began, according to Kelly Blue Book.

The average used car sold for $28,061 in August, the most recent month for which data is available - a decrease of $158, or about 1%.

Auto group Edmunds.com suggests that customers should settle for a larger monthly payment to avoid paying more.

In a report released Monday, Edmunds' director of insights, Ivan Drury, said consumers who want to save can think about the big picture when it comes to financing their car purchase. It might be hard to swallow to agree to a larger monthly payment, but you can save yourself thousands of dollars by making sure that the monthly payment you agree to is within your means.