LEE'S SUMMIT, Mo. — There are more new cars for sale on the lot of Bob Sight Ford in Lee’s Summit, Missouri, now than at just about any point over the past two years.
“This morning we have over 40 [new] cars in stock that are available for sale. For the last six to 12 months, we’ve been sitting at six, eight, 10 cars available,” said general manager Zachary Sight. “But prior to COVID, and everything else that happened, we would have 200 cars in stock.”
Everything else that happened included computer chip shortages, breaks in manufacturing and low employment numbers that all contributed to a low supply of new cars.
All the while, demand for cars was going up, partly because interest rates were low during the pandemic, making it easier to borrow money in the form of a loan for a car.
With low supply and high demand, prices for both new and used cars rose. In some cases, the value of used cars increased by 40%.
“It was a wild 18-24 months to say the least,” Sight said.
The Federal Reserve is raising interest rates, signaling it will do so again later this month. This means it’s less favorable to get a loan which should dampen demand for new cars, giving manufacturers time to catch up on supply and ultimately force prices back down.
Over the past two months, Sight says prices have started falling.
“Prices will continue to drop a little bit in general. I do believe we’ll see more incentives [like sales and discounts]," Sight said. “We just haven’t had enough supply for the demand, so there hasn’t been a reason for the manufacturer to do some of those things”
JP Morgan predicts new car prices could drop by as much as 5% and used car sales could drop by as much as 20% in 2023.
As interest rates continue to rise, manufacturers want to maintain demand.
Sight says Ford is offering promotions like a lower-than-standard interest rate on certain vehicles and ways to lock in a purchase with today’s interest rate, even if the customer won’t get the car today.
“Like ordering a new F150, one of the promotions they have now is you can lock in the interest rate on what you can get now, no matter when [the vehicle] gets here," he said. "It is taking longer to manufacture cars. You order a car, it could be two months or it could be six months, but now you can lock in your rates."