How the car buying process has changed in 2023
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Buying a car can be the second most expensive purchase many consumers make in their lifetime. Securing this high-ticket item has historically been a somewhat painful experience filled with haggling and confusion at the dealership lot.
But following the new normal the pandemic brought, many dealers are embracing the shift to online and creating a more seamless buying experience.
Car buying in 2023 is fraught with steep interest rates and supply chain issues keeping costs high. As consumers, it is important to use the shifting car buying process to your advantage. Consider the following ways that car buying may look different over the coming year to benefit both the driver and the seller.
What to expect when buying a car this year
As we move deeper into 2023, it is difficult to avoid news of high inflation and a looming recession. Economists believe the economy has a 64 percent likelihood of entering a recession this year, Bankrate’s Fourth-Quarter Economic Indicator poll found.
While the prediction of a recession is not directly correlated with a buyer’s experience on the car lot, expensive prices outside the dealership could mean additional discomfort when purchasing your next car. The month of December brought yet another record-high average transaction price for new vehicles, $49,507, according to Kelly Blue Book.
But the future is not all doom and gloom, as dealers have taken notice of the challenging macro-environmental trends.
Bankrate spoke with Dave Thomas, director of content marketing and automotive industry analyst at CDK Global, for insight on upcoming trends this year.
Vehicle price remains paramount
If you’re shopping for a vehicle this year, you — like 48 percent of buyers, according to the CDK Friction Point survey — may use price as your primary focus. While the time commitment that comes with car buying is a consideration for the other half of surveyed consumers, price is most important.
This year might be more of a roller coaster for drivers, says Thomas.
“For shoppers, the focus will be about those interest rates and how to find one that fits their budget,” he explains. This “could make the process a bit harder than it has been with the reduced inventory.”
When shopping, compare multiple financing options to ensure you sign off on the best deal, even with higher prices and interest rates.
When determining your budget, consider the whole of what you will have to pay — not just the monthly cost.
Low inventory persists
When most consumers set out to a dealership, they have some idea of the type of vehicle they are interested in buying. But many drivers have found lots empty of their dream vehicles. During CDK’s six-month research, “the number of shoppers finding the car they want in stock has not broken 50 percent,” says Thomas.
Even more, inventory is down 57 percent compared to 2019. While conditions are improving, supply remains below demand, according to J.D. Power. Low inventory has also led to an increase in drivers skipping the dealership altogether.
“Some brands are seeing inventories returning, but almost all are unique in how many cars are on the lot,” Thomas says. This “led to an increase in consumers ordering vehicles cars from the factory with the process being handled at the dealership.”
Options to buy online will expand
The typical car buying experience hasn’t had a major makeover in many years, and consumers have become accustomed to the drawn-out process of getting a new or used vehicle from a dealership.
This shift into online car buying is not a completely new idea. Lots of local dealers have had online marketplaces available for customers to look at inventory before arriving at the lot. But the online car shopping experience has become much more in-depth recently.
The break that many drivers took from the car buying process due to high prices also means that many need more guidance when shopping. So while online shopping is growing, Thomas explains that “76 percent of those we surveyed said they wanted to take their time to understand all of their options,” which is up from 67 percent in 2021, according to the 2023 Friction Points Study.
If you were one of the drivers that stuck to the sidelines over the past year due to steep prices, take comfort in this flexibility.
Dealerships will continue operating
While the traditional dealership isn’t going to be obsolete anytime soon, it has experienced shifts following the pandemic. Many drivers are taking advantage of online ordering like Carvana or Vroom when local dealers have empty lots. Even so, 91 percent of shoppers still took the traditional route when buying a car in the last year, according to CDK’s survey.
More interestingly, the 9 percent of drivers that did complete their car buying process fully online did not score the experience highly. With this in mind, it is wise not to overlook the hands-on experience that buying from a dealership offers.
But many dealerships are offering the best of both worlds approach with the option to start online and finish in-store. Thomas explained this switch. Many legacy automakers are “streamlining the online process and trying to make the transition from doing part of the journey online into a seamless one in the store.”
Drivers benefit from the ability to crunch the numbers from the comfort of home but still get behind-the-wheel experience before signing the paperwork.
4 ways to use online car shopping to your advantage
Online car buying is still relatively new, and it requires a bit of learning. While some advice falls in line with traditional car shopping, consider these tips when skipping the showroom floor.
In person or not, researching to find the right vehicle is the first step in the car-buying process. Consider what factors matter to you most: The size of the vehicle, fuel economy or even the style and color. While you might not be able to explore your new ride in person, YouTube car tours are a great resource to see the specifics a vehicle has to offer.
2. Set a budget
After you set your sights on the type of vehicle that you want, it is important to figure out how much you’re willing to spend and set a budget. Finding this number takes additional work but is much easier without a salesperson pressuring you. Take advantage of being home and consider all contributing factors, such as your salary, fuel, insurance and additional vehicle costs.
3. Check local inventory
Another advantage to shopping for your vehicle online is the option to check local inventory before going to look in person. This can be done in a few ways. Look at specific dealers in your area — search, for example, “Toyotas sold near me” or use websites like Edmunds or TrueCar. This research will also help in your negotiations because you’ll better grasp the price landscape for your dream car.
4. Chat online with salespeople
Negotiation can be one of the most intimidating aspects of the car-buying experience, but when you’re sitting behind a computer screen, it is much easier to haggle for the price you deserve. Most of the online marketplaces you will encounter will have a chat option. Use this as a space to ask the right questions. Focus on being firm, and share information you found while checking local inventory about competing price options.
The bottom line
It’s clear the car-buying experience has shifted for both the dealer and the buyer over the past few due to a combination of factors: Global pandemic, inflation, supply chain issues and growing technology. But it is important to remember that a refresh in the industry is taking place, and it is bringing increased accessibility and transparency to the driver.
So even though it is unlikely that car lots will disappear completely, consider shopping online to potentially save both money and time.