New Car Inventory and Pricing Trends in 2023: What Shoppers Need to Know

The automotive industry has faced unprecedented challenges over the past two years, with inventory shortages and skyrocketing prices creating a frustrating experience for car shoppers. However, 2023 brings a glimmer of hope as production ramps up and inventory levels begin to recover. In this comprehensive guide, we’ll explore the latest trends in new car inventory, pricing, and market dynamics, helping you decide whether now is the right time to buy or if waiting could save you more.

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The Impact of the Microchip Shortage on Car Inventory

The global microchip shortage, which began during the pandemic, significantly disrupted automotive production. Automakers were forced to prioritize high-profit models, leaving entry-level vehicles in short supply. This imbalance drove average car prices to record highs, with dealers often selling vehicles at or above the manufacturer's suggested retail price (MSRP).

According to Sam Fiorani, Vice President of Global Vehicle Forecasting at AutoForecast Solutions, the worst of the microchip shortage is now behind us. “Better access to chips and other components is enabling manufacturers to increase vehicle production,” Fiorani noted. “At the same time, concerns about a potential recession are slowing demand, which could lead to lower prices in 2023.”

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Inventory Levels Begin to Rebound

Recent data from J.D. Power highlights a steady improvement in vehicle production and inventory levels. Tyson Jominy, Vice President of Data and Analytics at J.D. Power, explains, “The industry has seen three consecutive months of deliveries exceeding 1 million units, and inventory levels have followed suit.”

MotorVero data supports this trend, with new-car inventory reaching approximately 1.4 million units in November 2022—a 31% increase from May 2022 and a 40% jump compared to November 2021. While this is a positive sign, inventory remains 57% below pre-shortage levels seen in November 2019, when new-car inventory approached 3.2 million units.

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More Time on the Lot: A Sign of Recovery

Another indicator of improving inventory is the increased time vehicles spend on dealer lots before being sold. J.D. Power’s December sales forecast reveals that only 47% of vehicles are expected to sell within 10 days of arrival, down from a record 57% in March 2022. Additionally, the average time a new vehicle remains in a dealer’s possession has risen to 23 days, up from 18 days a year ago.

MotorVero data shows a similar trend, with the average days on lot climbing from 39 days in November 2021 to 44 days in November 2022. This shift suggests that buyers have more options and time to make informed decisions.

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Top-Selling Models with Improved Availability

While inventory levels vary by model and vehicle type, some of the most popular vehicles are becoming easier to find. Here’s a breakdown of inventory improvements for top-selling models among MotorVero dealers:

• Ford F-150: Inventory increased by 32%, from 37,500 units in November 2021 to 49,500 units in November 2022.
• Ford Explorer: Inventory rose by 47%, reaching approximately 23,000 units.
• Toyota Camry (including Hybrid): Inventory climbed 36% to around 16,500 units.
• Toyota Tacoma: Inventory surged 47% to nearly 17,000 units.
• GMC Sierra 1500 and Chevrolet Silverado 1500: These models saw the most dramatic improvements, with inventory up 210% and 245%, respectively.

However, not all vehicles are experiencing inventory growth. For example, the Ram 1500 saw an 8% decline, while Toyota RAV4 inventory dropped by more than 7%.

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New-Car Prices Remain Elevated

Despite improving inventory, new-car prices continue to climb. J.D. Power estimates the average new-car transaction price reached a record high of $46,382 in December 2022—a 2.5% increase from the previous year. MotorVero data shows a similar trend, with the median price for new vehicles rising nearly 6% to approximately $41,000 in November 2022.

Price increases vary by model. For example, the Toyota Camry and RAV4 saw modest bumps of 2% and 3%, respectively. In contrast, full-size pickup trucks experienced significant price surges, with the GMC Sierra 1500 leading the pack at a 19% increase.

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Markups Begin to Ease

One promising development for budget-conscious shoppers is the decline in new-vehicle markups. According to Jominy, only 51% of consumers paid over sticker price in November 2022, down from 68% during the summer. This shift suggests that dealers are becoming more flexible as inventory levels improve.

Should You Buy a Car Now or Wait?

The decision to buy a car now or wait depends on your individual circumstances. Jominy predicts that prices will continue to fall modestly throughout 2023, making waiting an attractive option for some. However, there are risks to consider:

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• Declining Trade-In Values: Used-vehicle prices are falling, which could reduce the value of your trade-in. J.D. Power estimates the average trade-in value in December 2022 was $9,316—down 3.1% from the previous year.
• Rising Interest Rates: Average interest rates for new-vehicle loans are expected to increase to 6.40%, up 2.47 percentage points from a year ago.

For shoppers who can’t wait, leveraging a trade-in and taking advantage of moderate APR deals can help offset high transaction prices.

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Conclusion

The automotive market is slowly recovering from the challenges of the past two years, with improved inventory levels and easing markups offering hope for car shoppers. While prices remain high, the trend suggests that waiting could yield better deals in 2023. However, individual factors such as trade-in values and financing options should also be considered. Stay informed and weigh your options carefully to make the best decision for your needs.

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