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Car Shoppers Are Facing A Finance Nightmare
Car shoppers will likely be paying a lot more than they should in both the new and used markets in the months ahead, as the average new car transaction costs surged dramatically over the past year. EV buyers are already paying over 15% more than last year, while customers opting for regular non-luxury cars have been paying about $1,000 more than retail prices.
Lower vehicle supplies struggling to keep up with consumer demand is not the only factor pushing prices upward. Economists fear rate hikes will reach even higher than anticipated by the end of the year, with the inevitable side-effect of such hikes translating to higher car loan premiums, which affects most car buyers who are short on cold, hard cash.
With new car prices already at record highs, rising interest rates will likely turn them into "luxury goods" soon. Although wholesale prices of used cars have dropped by over 10%, with retail prices expected to follow, interest rate hikes could possibly negate those effects — it doesn't help that credit flow is reportedly limited to "a smaller portion of the population" either.
Even if diminishing consumer demand forces prices downwards, car shoppers will still have to contend with higher interest rates. This leaves shoppers with the dilemma of either buying now at higher prices while the interest rates are lower, or waiting for prices to drop later albeit at higher interest rates. Sadly, none of the options sound much better than the other.