Is buying a car a good idea in 2022?

In a car market constrained by shortages and production declines, there are more hurdles than ever to getting a good deal. Here’s a closer look at what’s been happening and how you should approach the current auto landscape. 

What’s the current state of the car market? 

There continue to be historic shortages. When Covid-19 struck the US in 2020, many plants producing auto parts closed down, curtailing production. When they could finally ramp up again, a new problem emerged: the world was facing a shortage of semiconductors — computer chips essential for manufacturing a modern car. With so many people quarantined at home, a tremendous demand for electronics (which also rely on semiconductors) contributed to a deepening shortage, further limiting new car production. 

Throughout 2021, consumer demand for cars has kept climbing, especially as public transit became a riskier endeavor. Cars beckoned as a potentially safer option that also offered extra flexibility. 

Now, with supply low and demand high, prices have skyrocketed. Almost 87% of new cars sold this November equaled or exceeded the sticker price, according to the Wall Street Journal.  

How should you navigate this type of market?

The high prices make it a costly time to purchase a new vehicle, so if you’re able to wait longer to buy, you should. Because demand is so high right now, dealerships and sellers have no incentive to offer deals that would be typical in another year’s holiday season. Competition is fierce, forcing some consumers into pressured decisions.

While it’s not clear that relief is around the corner, the more time that passes, the more time there is for some of the production issues to be resolved and the market to tilt back toward normal. Additionally, several car companies have delayed the rollout of some newer models planned for 2021 until 2022, meaning that there should be more options throughout the year. 

Are used cars a better bet?

Unfortunately, no. The troubles in the new car market have rippled to used cars, which are facing the same problems of low supply, high demand, and skyrocketing prices. Many rental car companies sold off their fleets at the beginning of the pandemic, which has further depleted the number of available vehicles.  

Still, it doesn’t hurt to do your due diligence and see if you can find a deal that fits your budget. Take caution if you’re using some of the newer remote delivery companies like Carvana and CarMax, as they have experienced a large number of consumer complaints. Surprisingly, your best bet for scoring a solid deal may be Craigslist, since you can negotiate with those sellers, whereas the remote delivery firms are fixed-price vendors. 

If you do explore the used car route, always request the vehicle’s Carfax report, which will detail its history, and have your own mechanic conduct an inspection before committing to the purchase. To ensure your safety, meet in a public location and bring someone with you. 

What are car market observers excited about in 2022?

2022 is shaping up to be a banner year for new EVs (electric vehicles). EVs have lower emissions throughout their lifecycle, and with environmental awareness on the rise, car makers are looking to boost their offerings. Newcomers slated to debut in 2022 include Tesla’s Cybertruck, the Ford Motor F-250 Lightning, and GM’s Cadillac Lyric, among others. 

The EV market will only get more crowded and competitive in the coming years, which is good news for consumers. Toyota will be rolling out 30 new models by 2030 and Nissan is investing $17.6 billion in battery-powered vehicles over the next five years.  

Does owning an EV really save you money?  

With car prices stubbornly high, EVs can be a good deal. A recent study commissioned by the U.S. Department of Energy showed a clear advantage, with EVs coming in 4 cents cheaper per mile on average than gas-powered vehicles, amounting to an expected savings of $8,000 over 200,000 miles. 

The difference is due to the lower cost of maintenance associated with EVs, along with the high cost of gas for internal combustion cars. Additionally, with an expected increase in EV charging stations across the country, it should get even easier to own an EV. 

‍

                                                               Bright can help you save more faster.

Use Bright to save faster for a car 

Bright can help you build more savings automatically – and help you save for a new car. 

Bright studies your finances and finds the fastest, smartest way to reach your savings goal, moving money automatically, when it makes sense for you. You can set your goals - like a deposit on a new card or the full price of a used car. Set your own pace – how much you want to save each month - and Bright starts saving for you, week by week. 

Bright can also help boost your credit score, so you can qualify for a better car loan. Sign up for Bright Credit Builder and get a safe and easy credit boost, automatically. And let Bright make your card payments for you every month, getting you debt-free faster and building a positive payment history for another credit boost. 

If you don’t have it yet, download the Bright app from the App Store or Google Play. Connect your checking account and your cards, set a few goals and let Bright get to work.

Recommended Readings:

Does refinancing hurt your credit?

5 common financial planning mistakes