GFA Federal Credit Union

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  • Jun 30, 2022

Navigating the New & Used Car Market and What GFA is Doing to Help

As we all know; car buying can be a daunting process, even in the best of times. From the “asterisk advertising” where prices, trade values, interest rates, monthly payments, and availability are all “disclaimed”, to the selling and finance process, car buyers have faced so many obstacles.

As daunting as it has been, today’s car buyers are facing a whole new challenge – inventory! As a result of the factory COVID shutdowns, supply chain issues and the highly publicized microchip shortage, new car production has been slashed. Of course, less new cars mean less trade-ins and former rental cars hitting the used car market, so both new and used prices have hit an all-time high. Hard to believe, but the average selling price of a new car is about $45,000. And all signs point to the situation getting worse before it gets better.

So, what do we do? The short answer is don’t overpay now. Yes, prices are higher, and if you need a car, you need a car. But in order to avoid overpaying, we need to first understand the market (where it’s at and where it’s headed), and then determine which vehicles will meet our particular needs, budget and timing, availability, and then, of course, where to find them. Luckily GFA’s Auto Advisors are here to help.

The key is to avoid anxiety, desperation, and even spontaneity. The vehicle you purchase today doesn’t have to be your “forever car”. There are always options. And a well thought out plan will certainly help you avoid a costly mistake, such as paying $5,000-$15,000 (or more!) over MSRP for any new car, including hybrids. $5 per gallon gas hurts, but there’s a line above which you’ll never save enough in gas to offset the incremental cost. Our Auto Advisors can always help with the math!

Same goes for used cars. While the average price of a used car is up over 50% in just the past year (evidenced by the fact many buyers are paying more for a 3 to 5-year-old car than the original owner paid when it was new), you can still overpay. Good value today means an easier trade down the road.

While leasing has helped many of us get into a newer car cheaper, in today’s market that’s not currently the case. You see, leasing is best when subsidized by the manufacturers. When a manufacturer wants to stimulate sales, they can subsidize the price (with a rebate) as well as the finance rate. But with the lack of inventory, there are virtually no incentives being applied to leases.

As we’ve learned from other cycles (like the ’05-’07 real estate crash), as new car production increases, used car values will plummet. The biggest concern for people overpaying today is that in 2-5 years when they want to trade, most will be so upside-down in their loan that financing out of their old car will limit their ability to purchase their next car.

This is also the reason we’re recommending GAP insurance on most auto loans. GAP insurance protects the borrower in the event the car is lost or totaled, by paying the difference between the insurance claim and the balance still owed on the loan. Most buyers should consider buying GAP insurance, even if it looks like they’re in a good equity position. Again, it’s the current new car production that’s artificially & temporarily inflating book values. Ask your Better Banking Representative about GAP+, which is a great value.

As always, our Auto Advisors are working hard to hunt down the right vehicles, prepare our members to be flexible and to act fast, and keep great relations with our dealer contacts. It is a juggling act for sure, but one our Auto Advisors all do anyway! 

Yes, the shortage of new and used vehicles in the marketplace is being felt by all. However, there ARE vehicles being produced and delivered, and trade-ins being taken every single day. And, AS ALWAYS, our Auto Advisors are here to help our members save time and money on the purchase of new and used cars, while taking advantage of competitive credit union rates and products. All in a safe, efficient, and hassle-free manner.

The key is, our Auto Advisors are not car salespeople. They are experts in the car business, who take the time to explain and educate our members. When our Advisors have the chance to explain our service, program, philosophy, market conditions, etc., our members understand that the service is about more than just locating cars. It gratifies us to hear members who’ve used the service say, “I will never buy a car again without using Auto Advisors!!”.

For more information about prices, interest rates, and availability, please reach out to GFA Auto Advisors.

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