After a whirlwind of three years that saw car prices jump due to supply chain issues, one sector may be leveling off in consumer demand: fun cars.
With an uncertain economy amid inflation and recession fears, 2023 should shape up to the year when used sports cars and convertibles cost less money.
J.P. Morgan Research predicts used car prices will decline by about 10% in 2023. Higher interest rates are impacting affordability, the firm’s lead automotive research analyst Ryan Brinkman wrote in his study.
As the economy is uncertain, consumers gravitate toward practical cars, said Tony Gabriele, a partner at four western New York auto dealerships, including Marina Auto Group in Webster, New York, and Auto Outlets USA, which focuses on used vehicles in Victor, New York.
That means sporty cars may be found at reasonable prices. A 2016 Mazda Miata convertible with just over 25,000 miles is currently priced at $23,500 at Gabriele’s Webster Marina dealership. The catch is the buyer has to know how to drive a stick shift.
For now, used car prices are dropping. But that may change if the 2023 economy slides into recession as shoppers will look for used cars instead of new ones.
According to a January study by CoPilot, a car-buying app, used car prices fell for six consecutive months from July to December 2022. That’s a drop of 8.8 percent since January 2022.
Gabriele said that new car inventory is improving, relieving supply chain issues during the pandemic.
“It’s about 70% of what it was pre-pandemic. Rebates and incentives are also improving,” Gabriele said.
Prices for a used car at Gabriele’s four dealerships are about 10% lower than they were a year ago due to the easing of freight problems. The wait for a new car has lessened, but interest rates are higher.
Interest rates for people with good credit on a new car are about 6.5% and 8% for newer used vehicles, Gabriele said. He said there is still a used car shortage for dealers, but the prices are leveling off.
On the supply chain issue, the Council for Supply Chain Management Professionals said in its latest report that freight volumes for sea, air and trucks are likely to decline in 2023. That means the freight rates are on track to drop from their pandemic highs.
The unpredictable factor for freight costs will be oil prices. While it has come down, it is still $1 more a gallon that in January 2022.
Car shoppers will find more inventory for new vehicles in 2023, Gabriele said. Prices on used cars are dropping on vehicles as interest rates rise. That fun convertible or used muscle car will be the best deals since practicality is in vogue in uncertain economic times.
Mary Chao is a New York City-based Specialty Reporter at Scripps News. Email Mary.Chao@Scripps.com.