Here’s what Seattle-area car shoppers can expect this year

Cara Biden chose a pleasant Saturday morning to drive from her home in Everett to check out the dealerships in Renton. She was hunting for a new midsize SUV after her parked car was sideswiped and deemed “totaled” by the insurance company earlier this month.

That was bad luck, but Biden viewed it as an opportunity to drive some cool cars, shop around for a bargain and haggle with salespeople.

Biden was looking for a good price, fuel efficiency and reliability, and she also wanted comfortable seats and a quiet ride with low cabin noise for long scenic drives. She says she likes to drive and does a lot of it.

“I love the windshield time,” she said. “You spend more time in front of your windshield than probably your TV.”

So, she wasn’t going to drive off a dealership lot with a new SUV until she found precisely what she wanted at a fair price based on her research.

Seattle-area auto dealers say 2024 should be better than the past few years for discerning car shoppers like Biden.

Supply shortages during and right after the COVID-19 crisis meant that dealerships in Washington and nationwide had fewer cars and trucks to sell. At times, the lots were nearly empty, and persistent inventory shortages reduced the number of statewide sales at a time when demand was rising due to low interest rates.

These conditions created a sellers’ market that lasted into 2023. Many dealers cut out incentives and sold vehicles at higher prices.

But as supply shortages began to subside in early 2023 and continued to improve through the year, different market factors have been in play, with the advantage tilting to the buyer.

“The current conditions are going to make this a great year for customers to buy a car,” said Matthew Phillips, CEO of Car Pros Automotive Group, a Kia and Hyundai dealership with locations in Tacoma and Renton.

“They’ll have more choices of available inventory on the ground and interest rates look like they’re coming down,” Phillips said.

In December, Cox Automotive, the parent company of Kelley Blue Book, forecast that the national auto inventories in 2024 would approach pre-pandemic norms, rising substantially over the 2022 levels, which was the height of the shortage.

With inventories close to normal levels and interest rates expected to decline somewhat, Seattle-area dealers are expecting to sell more cars this year than last year but at a lesser profit.

Cox predicted that sales nationally would increase by around 2% year over year to 15.7 million sales, making 2024 a stronger year, but well below new-vehicle sales of more than 17 million in 2019.

“It’s starting to get to a point where you can actually see a few cars on the lot because we had a three-year span where we presold everything,” said Arun Vaidyanathan, dealer principal at Brotherton Cadillac with locations in Shoreline and Renton.

Used cars

Used-vehicle sales nationwide will also see small gains, Cox predicted, with total sales perhaps topping 36 million and retail used vehicle sales at 19.2 million, up 1% over 2023 levels.

Tim Duffy, owner of Duffy’s Auto Brokerage with locations in Auburn and Covington, said earlier this month the customer traffic in his lots has been above average for the winter.

“Historically, November and December can be a little slow and then things pick up for us in January and February, but we had a very good November and December,” Duffy said.

Duffy said he’s already noticed that buyers are more likely to shop around.

“COVID was a very unique time in that the availability of cars for dealers to purchase was down, hence prices shot up,” Duffy said. “It was a common practice to have buyers place nonrefundable deposits on cars without seeing or test-driving a vehicle. The number of people placing nonrefundable deposits is still above average but below what it was a year ago.”

In King County, used car sales by franchises and independent dealers declined 1.8% in 2023 — to 98,449, from 100,252 in 2022 and 112,287 in 2021 — according to the Washington State Independent Auto Dealers Association.

However, used-car dealers in King County sold more cars and light trucks this past December (9,343 units) than in December 2022 (9,137 units), perhaps an early sign that demand from buyers could be picking up and 2024 could be a stronger year for used car sales at King County dealerships.

Electric vehicles and hybrids

Although electric vehicles will continue to grow in popularity and sales this year, their growth is expected to slow down nationally, according to a report from BloombergNEF. The report expects EV sales nationwide to grow a rate of 32% in 2024, slower than the expected 47% for 2023.

Some Seattle-area EV dealerships already feel the pullback. “The market is soft,” said Peter Benson, owner of Paramount Motors NW, an independent dealership in Seattle that specializes in pre-owned electric cars and hybrids.

“It’s still an expensive time to buy a car,” Benson said.

In 2023, two electric vehicle brands, Tesla and Rivian, saw huge jumps in new registrations in Washington. New registrations of Tesla models — many of which saw significant price cuts last year — rose 54% to 21,197. Registrations for Rivian models more than tripled over 2022 levels to 1,983 in the first 11 months of last year. 

Limiting tax credits on electric vehicles per new rules that kicked in this month may also hit EV sales. The new criteria reduced the number of qualifying models to 13 from about two dozen, according to federal data from fueleconomy.gov.

Phillips said that while demand for EVs has cooled at his dealerships, hybrids are still popular for their fuel economy.

“A lot of people that are curious about EVs but maybe aren’t quite ready to pull the trigger for whatever reason,” Phillips said. “Range anxiety and charging still are an issue for a lot of people. We’re seeing growing interest in plug-in hybrids, which are a great step toward EVs.”

Affordability

Still-high interest rates and inflation are likely to discourage some would-be buyers.

“The prices are still a little high for what you’re getting,” said Joe Gallegos, who was car shopping around Renton and had stopped into the Hyundai dealership. Gallegos said his Kia was recently stolen and then trashed. He was looking for a conventional gas SUV with strong security features that he planned to finance through a credit union.

Despite the rates and costs, Gallegos planned to buy a fuel-efficient vehicle for commuting to work at the shipping docks in Seattle.

“If you are looking for something, you have to deal with it,” Gallegos said.

Dealers are already offering buyer incentives, Vaidyanathan said. General Motors, for example, has lower interest financing available for qualifying buyers, rebates of up to $2,000 and subsidized leasing rates.

Post-COVID many Seattle-area dealers were selling above the manufacturer’s suggested listed price, or MSRP. This year, most dealerships are likely to price at MSRP or lower.

“It really depends on the model and the make, but definitely there’s less competition among consumers to get vehicles on certain models,” Phillips said.

Nationwide dealership discounts and incentives will increase, although not at the aggressive pre-pandemic level of discounting, and prices will fall, according to Cox. 

Price drops at Western Washington dealerships fall in line with national trends. In December, the national average transaction price for a new vehicle was $48,759, which was down 2.4% year over year, according to Kelley Blue Book. Prices on cars and trucks have dropped year-over-year for four months. Some of the brands with big recent price drops include Tesla, Land Rover and Volvo.

Car shoppers still will face affordability hurdles this year, especially when it comes to financing. For a new car, the rates can range in the low to mid-5% range for people with good credit to more than 14% for low scores, according to Forbes Advisor.

Vaidyanathan said the new-car buyer at his dealership can often qualify for dealer financing in the 4% to 5% range.

As the dealerships move to clear their inventories out later this year, the rates could come down. However, buyers probably won’t see many offers at or below 3% on dealer financing until interest rates fall generally, Vaidyanathan said. 

As of December, the average rate in Washington on a car loan was 6.27% for a new car and 9.82% for a used car, according to the automotive information company Edmunds.com. These rates, however, are lower than the national averages of 7.1% for a new car and 11.6% for used cars.

The interest rate does affect car affordability. Online auto-loan interest calculators can give buyers a rough idea of what their borrowing costs might be.

If you are buying a $35,000 car, paying $7,000 down, and taking a five-year loan for the remaining $28,000, you would pay $4,468 in interest. If you taking the same loan at 7%, the overall interest cost jumps to $6,371. The actual monthly payment would increase from $451 at 5% to $477 at 7%, a difference of $1,560 over the life of the loan.

Duffy said that while interest rates aren’t ideal, they have dropped somewhat recently. Many used-car buyers are paying cash or paying off their loans early. He noted that most used-car buyers aren’t spending $50,000 or more on a car. The lower prices of used cars tend to reduce the effect of rates.

“The higher interest rates can hurt us on the more expensive inventory,” Duffy said. “Other than that, these higher interest rates don’t seem to affect us much.”