The Struggle Is Real for Car Buyers, Sellers in 2022—and There’s No End in Sight
Record-high sticker prices and climbing interest rates make for a tough car market in the wake of the pandemic.
Written by Julian de Sevilla
Reviewed by Kathleen Flear
Table of Contents
- Average car prices peaked in December
- Interest rates continue to rise
- Supply chain issues persist
- A growing interest in electric vehicles
- The conclusion: If you can, wait to buy a car
Load full table of contents
It’s a pretty bad time to buy a car for reasons involving interest rates, microprocessor shortages, and of course, the pandemic.
Auto industry publication Automoblog just published
a report
analyzing the current and future state of the car market, and the outlook is less than optimistic. Compare insurance quotes from 50+ insurance companies with Jerry in under 45 seconds
Compare insurance quotes from 50+ insurance companies with Jerry in under 45 seconds
4.7/5 rating on the App Store | Trusted by 5+ million customers and 7 million cars4.7/5 app rating | Trusted by 5M+ driversAverage car prices peaked in December
The average price for a new car reached a historic high of $47,243 last December. As of April, the average dropped slightly to $46,404 but is still well above MSRP. The report suggests this downward trend may continue but also admits it’s too soon to tell.
Average
used car
prices also peaked in December, reaching $28,205 followed by a similar downturn in early 2022. Prices peaked again in April at $28,365 and have since decreased. 
Interest rates continue to rise
Interest rates—the cost of borrowing money, like in the case of an auto loan—have increased steadily throughout the year after dropping to almost zero in 2020. This would negate a decrease in car prices, if one were to occur.
This also affects car dealerships that borrow money to buy their stock of vehicles, meaning inflated car prices could remain. The likely result is reduced consumer demand since the higher prices aren’t connected to any additional value.
Supply chain issues persist
A shortage of microprocessors used in all modern vehicles and other electronics is one of many supply chain constraints limiting the availability and increasing the price of new cars. The shortage cost the auto industry an estimated $210 billion in lost revenue and limited the production of 7.7 million vehicles.
There’s no clear answer as to when the shortage will ease. Some estimate a return to normal as early as the start of next year, while others expect it to last into 2024.
Automakers are also struggling to source crude iron, which is used to make steel. About two-thirds of it used to come from Russia and Ukraine, but Russia’s ongoing occupation has forced companies to look elsewhere.
A growing interest in electric vehicles
Electric and plug-in hybrid vehicles (EVs) continue to chip away at the car market as gas prices rise and the damage caused by fossil fuel emissions becomes harder to ignore. Though just 8.3% of new vehicles sold in 2021 were EVs, that growth has doubled every year since 2019 and isn’t likely to slow down.
Demand for EVs is spurred in part by a potential increase in the EV tax credit from $7,500 to $12,500 (which President Biden supports), as well as
high gas prices
. The conclusion: If you can, wait to buy a car
Sticker prices are about as high as they’ve ever been and interest rates aren’t going down anytime soon. Unless money isn’t a concern, it’s just not a good time to buy a car.
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