Inventory and interest rates are up, so here’s what to expect if you’re buying a car in 2023

Interest rates are making new cars less affordable. Experts say used vehicles priced between $10,000 and $15,000, even with higher miles, can be a better value.
Published: Jan. 18, 2023 at 9:22 AM MST
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GOODYEAR, AZ (3TV/CBS 5) - New vehicle deliveries are happening daily at dealerships like Yates Buick GMC.

“People used to be calling us for the one truck we had. Now we have a lot full of trucks,” said Whitney Yates Woods, the dealer principal at the dealership in Goodyear. “A lot of the chip shortage crisis is over. We still have a little residual, but we are seeing a lot more inventory on the lot.”

There is one big exception for new electric vehicles. “If you want something electric, you’ll order it through your dealer ahead of time,” Yates-Woods said. “It’s not something that’s going to be sitting out on the lot. Those are going really fast, and there’s still a limited supply.”

Year over year, the cost of new vehicles is up almost 6%, according to the Bureau of Labor Statistics’ December consumer price index. For used cars and trucks, prices have dropped nearly 9%. “We’re seeing some reduction in demand, and that is going to start lowering, and is already starting to lower the price of used cars,” said Karl Brauer, an analyst for iSeeCars. The drop in demand, Brauer said, is caused in part by rising interest rates.

According to data from Edmunds, the average APR for new financed vehicles in the fourth quarter of 2022 jumped to 6.5%, while the average APR on used vehicles hit 10% compared to 7.4% in the fourth quarter of 2021. “I think there’s an attitude that has shifted, that maybe I don’t want to spend thousands or tens of thousands of dollars like I thought I did three to five months ago,” Brauer said.

For buyers with good credit scores, better rates may be available through a credit union or the manufacturer. “When you go into the dealership, be sure to ask, ‘Does the manufacturer have anything out right now? Do they have any rebates? Do they have any special financing offers?’ And then see if you qualify for them,” Yates-Woods said. “The best rate that we’re offering right now is 2.9% for financing if you qualify.”

For consumers whose primary concern is cost, Brauer says there are good options. A recent iSeeCars study looked at 2 million vehicles to evaluate which used models have the lowest prices with the longest remaining lifespan. For 10 year old vehicles, the company says the best three cars for the money in Phoenix are the Chevy Impala, the Toyota Prius and the Kia Sedona, with price points between $10,000 and $15,000.

“The average used car is still $33,000, but you can get cars for $10,000 that have 110,000 likely miles left on them,” Brauer said. “In 2023, you can buy a 100,000-plus mile car that likely has another 100,000 miles left in it.” Before you buy a used vehicle, check a vehicle history report and get an inspection at an independent mechanic.