Consumer Alert: Need a new car? Read this first!

ROCHESTER, N.Y. This Consumer Alert is all about your car.

Is it on its last wheel? If so, you might be contemplating buying another one. So the question I wanted to answer for you today is whether you should invest in that new car this year or next year.

To get the answer, we need to know what interest rates are now and predict what they might be next year. According to US News and World Report, this month the average interest rate for a new car loan is 9.31 percent.

And that’s with excellent credit. For those with poor credit, the average rate is just over 22 percent. It’s even higher for used cars. 

And it’s likely the Fed will continue to hike interest rates next year. We don’t need a crystal ball for that. We know because on Monday Federal Reserve Governor Christopher Waller said, “We still have a ways to go” when talking about the fed’s efforts to tame inflation.

So if I need a car, should I buy now before rates go up again? That’s a question for News10NBC finance expert and managing director at Invessent Jarrett Felton.

“I know for me when I bought a vehicle in December of 2021 and my interest rate was 1.9 percent,” Felton said. “That’s unheard of at this point. But just about a year ago we could do so. So if you’re going to make those big-ticket purchases, I would say put a plan in place and even a roadmap of how you’re going to get there, and all the financing solutions, because the last thing you want to do if you truly believe we’re heading into a recession is deplete your savings and your cash reserves.”

If you saw my investigation on Monday, you know our finance expert told us that building savings is key in planning for a recession. So Felton says if your old hooptie is still running, now is likely not a good time to buy.

 But if you need a new car, consider the following factors:

• You can usually find your best deal on a used car December 26-31 as dealers work to clear last year’s inventory.
• New and used car prices climbed 30 percent and 50 percent respectively since the start of the pandemic.
• But JP Morgan crunched the numbers, and it predicts new car prices will fall 2.5 to 5 percent next year, and used car prices will fall 10 to 20 percent.

But Fed Bank president Mary Daly said Wednesday the fed will likely raise rates at least another 1.5 percentage points and perhaps as high as 2 more percentage points. That rate hike would add roughly 20 bucks to the monthly payment on a $35,000 car.

As I’ve shared with you, I have a 12-year-old car. She’s still running well, so I’ve decided to wait until used car prices drop next year because a 20 percent drop in the car price would more than offset the hike in interest rates.

But if your hooptie is in poor shape, you have a number of factors to consider. Before buying, take these steps I wrote about extensively earlier this year.