The auto industry has been steadily growing for the past five years. Many Wall Street analysts have stated that the industry’s profits have started to peak. These forecasts are discouraging for shareholders, but they could actually benefit consumers.
Large auto companies have noticed fewer buyers are purchasing vehicles in recent months. They are desperately looking for new ways to draw more customers. Here are some ways that consumers are expected to benefit.
Lower Demand Drives Down Pricing
According to a recent report from Cars.com, prices of used cars have dropped for the third month in a row. July is the first month where the average price of used vehicles was below $23,000. Prices have dropped the most for Hyundai, Lincoln and Land Rover vehicles.
Automobile manufacturers need to compete with private parties selling used vehicles, which means they need to price their cars accordingly. Many experts believe that prices of both used and new vehicles will continue to fall in the near future.
Car companies are also providing new financing options to draw in new customers. Adam Jonas, an auto industry analyst for Morgan Stanley, said that these companies have been discussing expanding financing since the beginning of the year. More lenient lending requirements will make it easier for many cash strapped citizens to purchase their own vehicles.
Car companies are also offering new incentives to make vehicles more appealing to customers. However, TrueCar President John Krafcik and other experts believe they are overly optimistic about the sales they will bring in. They believe that many auto companies are ordering too many vehicles, which will force them to decrease their prices even further. A growing supply of cars from Mexico and other developing economies could cause prices to fall further.
A large volume of inventory also gives customers more options. Prospective car buyers shouldn’t have difficulty finding the right vehicle.
Looking for a New Vehicle
There are several reasons that demand for new and used vehicles may start to decline. Excessive supply, a stalling labor market, foreign competition and other economic factors are expected to weigh on the industry in the coming months. These factors may be discouraging for industry executives and shareholders, but they have given customers an advantage.
Consumers should be on the lookout for the best deals. They also shouldn’t hesitate to negotiate for the price they are looking for. Many people should find better deals in the near future, but they will need to keep their eyes open and do their research beforehand.