Should You Buy a Car in 2023?

Quick Answer

Buying a car in 2023, just like in the preceding few years, may be challenging due to economic uncertainty, lack of auto components and supply chain issues. Thankfully there are things you can do prior to the purchase to ensure the process runs as smoothly as possible.

Young woman looking into a car window contemplating buying a car

There's nothing quite like the thrill of a brand-new vehicle. Over the past few years, however, the COVID-19 pandemic and other factors have made the market for new cars more challenging. With that in mind, will 2023 be a good time to buy a new vehicle? It's a simple question with a not-so-simple answer. Ultimately, the decision to purchase a new car depends on a variety of personal factors and the current auto market.

What to Consider Before Buying a Car in 2023

The decision to buy a car is a personal one that depends on your finances and what type of car you want. Current market conditions, including inventory and auto loan rates, also play a role in whether it's a good idea for you to buy a car or wait. Here are the factors to consider as you weigh your options.

1. Your Finances

Buying a new car is a big decision that requires a thorough examination of your individual situation, as well as ongoing economic trends. In 2022, we faced an uncertainty within the car market not seen in many years. And now, even as the world is finally starting to rebound from pandemic-related issues, other economic factors could affect consumers' car-purchasing power.

It's important to be sure your job and financial situation are stable enough to allow you to pay off such a big investment. After all, getting a loan for a new vehicle is a multiyear commitment. When considering a new car, be on the lookout for factors that could affect your ability to make a loan payment every month, such as inflation and interest rates. If you don't feel your situation is stable enough to deal with changes to your income and expenses, it might not be the right time for a new car.

2. Supply Chain Issues

Shortages of vehicles on the market have persisted for more than two years. About 4.4 million vehicles are expected to be affected by chip shortages globally by the end of 2022, according to AutoForecast Solutions' data. Despite the fact that chip shortage and supply bottlenecks have begun to ease, the semiconductor and supply chain issues will most likely continue into the near future.

3. Auto Loan Interest Rates

Since early 2020, market challenges have caused some would-be carbuyers to put off the idea of buying a new vehicle for a later time. With supply unable to meet demand, prices climbed higher. And in 2022, rising inflation increased the cost of borrowing money to purchase a new car. Higher rates and more expensive car prices don't seem to be going away anytime soon. J.P. Morgan estimates show that new cars will decrease in price by no more than 5% in 2023.

If you plan to finance your new vehicle, your credit score will be an important factor in the interest rate you'll receive from a lender. A higher credit score can help you qualify for lower interest rates. Even with good credit, however, the increased cost of a new car can make it more difficult to get a loan. Taking steps to improve your credit score can put you in a better position to land an auto loan with favorable terms.

4. Electric vs. Gas

Electric vehicle (EV) ownership has been on the rise in recent years. The number of people opting for an electric vehicle is steadily increasing as new models are introduced. That trend is likely to continue in 2023.

Depending on your needs, an EV might be a good choice for you in 2023. As the number of registered EVs increases, the infrastructure adapts to better fit reality. Many disadvantages, which were once a concern when considering an EV, no longer apply. For example, with an ever-increasing number of electric vehicles driving around, the number of replacement parts and charging stations is also increasing.

An electric vehicle is still a greater one-time expense, when compared to buying a standard gas vehicle of the same class. However, considering the fact that gas prices are on an upward trend despite the occasional dips, buying an electric vehicle might turn out to be a money saver in the long run. A recent U.S. Energy Department analysis shows that EV drivers spend on average under $1,000 dollars annually on electricity for their vehicles, versus costs of fuel between $2,000 and $7,000 for gas-powered vehicles.

5. How a New Car Affects Your Car Insurance Costs

If you're considering buying a new car, a change in your insurance premium needs to be expected. According to data gathered by the insurance marketplace Gabi®, a part of Experian, the average cost of insuring a new vehicle is $1,852 a year. When insurance companies calculate your premium, many different factors are taken into account.

For instance, new cars are more expensive to replace or repair than older vehicles, which means your insurance company will likely charge more to insure a new car. New vehicles are also a higher priority for potential thieves. This poses a greater risk, in turn increasing your premium.

The Bottom Line

Buying a new vehicle is certainly exciting, but ensuring the process runs smoothly and within budget is key to making sure that excitement doesn't sour into regret down the line. Buying a new vehicle is a significant expense on its own. In addition to making sure you get the best deal on a vehicle, you can also take steps to secure the right insurance to protect it.

With Experian, it only takes a few minutes to get quotes from more than 40 top insurance companies, all in one place. You can compare auto insurance coverage and costs with Experian and check your savings.