In the market to purchase a brand new car? There's a bit of good news, but it comes with a catch.
New car prices are expected to start dropping soon -- but thanks to rising interest rates, car loan payments will likely stay right where they are, experts say.
"To our clients who refused to pay above sticker for a new car, your patience is about to pay off," Adam Jones, chief auto analyst for Morgan Stanley, wrote in a note to clients, NBC News reported.
Jones went on to attribute the predicted price drop on declining sales and an excessive inventory of new vehicles.
A recent report from J.D. Power also predicts lower prices for similar reasons.
The news couldn't have come at a better time.
In September, the average price for a new car was $45,622 -- a 6.3% increase over the same month last year, according to J.D. Power.
However, interest rates on car loans have climbed to almost 6% -- a 15-year high, Jones said.
"New cars may finally become more available just when most Americans can no longer afford them," Cox Automotive chief economist Jonathan Smoke in a statement. "And that does not bode well for a supplier base already on the ropes from three years of low new-vehicle sales."
Smoke noted that credit is still available, but he said it's "flowing to a smaller portion of the population, which means demand is shrinking."
"Many consumers have limited ability to secure a payment they can afford," he said. "We are now seeing the highest interest rates in 15 years, and that means affordability is eliminating lower income and lower credit quality buyers."
Cox Automotive expects just 13.7 million new vehicles to be sold in 2022, a level not seen in a decade.
"At that sales pace, the industry can expect to see further stress in the supply chain, which may lead to further inventory disruptions," Smoke said. "With prices at record highs and rates heading higher, the new-vehicle market will behave like a de facto luxury market for the foreseeable future."
That means new cars could soon become a luxury item.
With average new-vehicle prices pushing past $50,000, automakers are chasing "high-credit, high-income buyers who are less likely to lose jobs in recessions and enjoy the ability to pay cash for new vehicles or secure lower rates when they choose to finance," said Smoke.
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