New Car Prices May Drop in 2023 Because Nobody Is Buying Them
The market for new cars is in a strange state. With car prices at new highs, and demand is also high, prospective buyers are in a strange bind. A part of them wants to purchase a new car. But considering the record highs for average new car prices have reached, many of them have opted to hang onto their current vehicle for a while longer until it is no longer an option.
It has been this pattern of events that has caused many dealers to be plagued with an oversupply of new cars that they can’t seem to get rid of. It was recently reported that many dealerships are oversupplied with new 2023 Jeep Renegades that it would take them about two years to be completely rid of them.
Dealers & Automakers May Lower New Car Prices To Battle Oversupply
So what will the U.S. car market do to drive up more sales? According to Yahoo Finance, a price war may be on the horizon with dealers duking it out by dropping new car prices.
The UBS (Union Bank of Switzerland) reported that global car production will have exceeded sales by 6% in 2023, which calculates to an excess of 5 million new vehicles that will remain unsold. In order to close this gap, some price cuts on these remaining units are expected to happen in the fall of 2023. While many automakers are expected to lower their new car prices later this year, some EV companies like Tesla have already begun dropping the MSRPs on new units.
“Given the bullish production schedules, we see high risk of overproduction and growing pricing pressure as a result,” UBS said in the report. “The price war has already started unfolding in the EV space, and we expect it to spread into the combustion engine segment [during the second half of 2023].”
Experts believe that brands that produce family-oriented cars will likely have a negative reaction to these price cuts. However, luxury brands are expected to fare better from lowering new car prices.
Kelley Blue Book reported that while the new prices have been consistently dropping for three months in a row, and that customers can expect them to drop even lower, their MSRPs still remain considerably high.