After the economic crash of 2008, many of us spent years getting back on our feet. And by now, things are supposedly better; unemployment is low, the stock market is up, and all the other indications point towards an economic recovery. But new car sales are hardly at the levels they were during the economic boom, and it might have to do with wages.
Ultimately, it’s pretty simple: You may not have gotten much of a raise over the last few years, but car prices have been going up no matter what. In fact, car prices have steadily risen over the last few years to cross the $30,000 mark in 2014, but wages haven’t been rising to match.
That’s a problem for obvious reasons. It’s not that people aren’t buying cars; they are. They’re just not buying cars that cost more than their trade-in was budgeted for every month. Or, they’re opting to take longer to pay off the car; we’ve seen the rise of longer loan terms with people taking six, seven, and sometimes even eight years to pay off a car.
So what does this mean for the average man on the street looking to buy a new car? Does this put you at an advantage … or a disadvantage?
Pay Now, Or Pay Later
The answer largely depends on how much longer you’re willing to wait to buy a new car. And it’s somewhat complicated by the fact that the “average” price of a car is somewhat skewed by luxury models and the fact there are more cars with more features at more price points now than at any other time in the history of cars.
Right now, it’s not necessarily the best news if you’re shopping for a car. Much depends on what you’re looking for, but you may have to switch makes and models to find a car you can afford. Brand loyalty is fairly common, but if you really can’t afford the car you prefer, you should look for something similar. One thing to remember about the common solution, accepting a longer loan term, is that you will pay more in interest the longer you take to pay off your loan. You should work out the math and be sure you’re comfortable with paying that much more.
Alternatively, you can consider a used car. Financing is just as commonly available for used cars as it is for new ones, and you can often find a better price point that more easily fits in your budget. Keep in mind that late-model used cars will offer you the best deal, and that every rule of buying cars still applies; do your research and make sure you’re not getting a deal that’s too good to be true.
Finally, if you’ve got a good car and are simply considering buying a new one soon, it might make sense simply to wait. Prices tend to go in cycles and reflect demand, so sooner or later, new car prices will begin dropping in reaction to various market forces. Patience, in the long run, might be your best tool.