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Prices on both new and used cars have soared since the beginning of 2020, and experts aren’t expecting them to fall anytime soon. Here’s what you need to know about the current auto loan market and how to navigate it successfully

Why are auto prices so high?

When the pandemic hit American shores, demand for new and used cars shot up. This was the result of many avoiding public transportation for safety reasons. The mass exodus from big cities and their high rates of infection also boosted the demand for new cars.

At the same time, supply of new and used cars dried up, thanks to the following:

• The pandemic halted production of new vehicles for a bit, drying up sales and their subsequent trade-ins.
• The production freeze prompted a freeze in the manufacturing of chips for automobiles and auto parts.
• Business and leisure travel paused for months, leading to a steep decline in car-renting travelers. This led to rental agencies holding onto more of their cars instead of selling them to used car dealerships.

The rise in demand and shortage of supply naturally triggered a steep increase in prices of both new and used vehicles.

Rethink your auto purchase

If you’re in the market for a new car and the price tags are scaring you, consider holding onto your car for a little longer until the market stabilizes. Make your vehicle last longer with these tips:

• Use a trickle charger to keep the battery in excellent condition.
• Change your filters regularly.
• Follow the service schedule.
• Keep all fluid levels high.
• Avoid sudden braking.
• Replace spark plugs when they begin showing signs of wear or melting.
• Check your tires regularly and rotate and inflate them as needed.
• Pay attention to all warning lights.
• Have your car rust-proofed.

Tips for buying a car in today’s market

If you’ve decided to go ahead with buying a car, it’s best to adjust your expectations before hitting the dealership.

First, a seller’s market means many dealerships will not be as eager to close a deal as they tend to be. They have more customers than they can service now, and that can translate into a willingness to move only slightly on a sticker price of a car, or a refusal to negotiate a price at all. Processing a car loan may now take longer, too.

Second, expect to pay a lot more than usual for your new set of wheels. If you’re looking to purchase a new car, prepare to pay approximately $40,000. Also, as mentioned, supply of new cars is down while demand is up, so you likely won’t have as many choices as you may have had in the past.

The used-car market has been hit even harder by the pandemic since prohibitive prices and a short supply has pushed more consumers to shop for used cars instead of new vehicles.  This increase in demand, coupled with the dwindling supply, has driven the prices of used cars up to an average of $23,000, according to Edmunds.com. If you’re thinking of buying a used car, prepare to encounter a highly competitive market where bidding wars are the norm and cars are super-expensive.

If you’re looking to take out an auto loan, consider one with your credit union. The most recent data shows that auto loans at credit unions are a full two points lower, on average, than auto loans taken out through banks. Car prices may be soaring, but credit unions continue to deliver lower rates and customer service you can really bank on.

The auto loan market has been hit hard by the coronavirus pandemic. Follow the tips outlined here to navigate today’s car market successfully.

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