I'm wanting to buy a car in the next few years. Covid caused used car prices to jump, and new car prices followed along. Prices have started to come back down, but my understanding is that they're still higher than normal.
Is there an easy way to know when car prices have gotten back to normal? Is there an easy way to know how much more I would be paying than I would be if things were normal? Are there estimates on how long it will be before prices get back to normal?
High and low prices can only be seen looking into the past with a certain distance. When you know that X has been a good time to buy it is already over. And any good estimate is likely to fail because people might act on it and change the situation.
Therefore do not focus on timing, focus on whether you need a car and what type. The right time to buy is when you need one. Cars are a depreciating asset and therefore - to be honest - not an asset at all but a liability. The upkeep for a car is considerable and buying a car that you do not really need will likely cost you more than fluctuations in price. Also it matters a lot more what you buy than when you buy.
Several factors are driving the recent increase in new and used cars:
The lack of used cars further drives up the cost of used cars for people who need one now.
It is widely believed that these issues are transitory and will be resolved in the next few months/years.
Assuming you're going to buy a car because you need one, it's kind of a moot point since you won't have a choice but to buy the cars that are available at the prevailing prices.
To gauge whether you're getting a good deal, you could check the Kelly Blue Book value or look at the ratio of the price of used vs new cars over time.
The Bureau of Labor Statistics computes the official inflation index and also provides the data so that we can look through it. Using the "Data Finder" at https://www.bls.gov/cpi/data.htm, we can find the following:
Leased cars were at historically low prices at the beginning of 2021: https://beta.bls.gov/dataViewer/view/timeseries/CUSR0000SETA03
Used cars were 10% higher in October 2020, dipped a bit at the beginning of 2021, and are now 40% higher than pre-pandemic levels: https://beta.bls.gov/dataViewer/view/timeseries/CUSR0000SETA02
New cars are currently 10% above pre-pandemic levels: https://beta.bls.gov/dataViewer/view/timeseries/CUSR0000SS4501A
This answers the second question of how much more are cars costing. The first question of "how to tell things are back to normal" would be answered by the costs dropping back to pre-pandemic levels or leveling off to their future prices (which we wouldn't be able to determine until much later). The third question of how long until things are back to normal is much more difficult to answer.
