Senate Cents: A Financial Wellness Blog

If you spent the year waiting for the perfect time to buy your next car, you might be shaking your head frustrated that none of the expert predictions for more inventory materialized. If anything, buying a car actually got harder in 2022, with fewer new vehicles available to just walk in and buy.

After the supply issues of 2021, this was supposed to be the year that car buying was going to get at least a little easier—but that definitely didn't happen. Car prices skyrocketed and for the first time, the purchase prices of new cars averaged above the manufacturer's suggested retail price (MSRP). Additionally, as the market shifts toward both bigger vehicles and electric vehicles, choosing a family car gets a little more complicated with the sheer number of models that are perfect for growing families.

It's not all bad news, though. 2022 did bring a shift toward doing more of the car buying process online, which comes as a welcome relief for many car buyers who find dealerships unpleasant.

As we look forward to 2023, buying a family car may feel impossible—and don't get me wrong, it's hard—but there are steps you can take to make the process feel a little smoother, especially once you understand how purchasing a vehicle has changed over the last few years.

Steps To Choosing a Family Car

Consider your budget

"A family should set a budget with an understanding of how much they want to spend on a vehicle, keeping in mind things like insurance and maintenance," says Jessica Caldwell, executive director of insights at Edmunds. You'll have an insurance payment, repairs and maintenance, fuel, and other costs to consider.

There are many online resources to help you with figuring out these costs, including RepairPal's tool to determine average repair and maintenance costs. Consumer Reports can tell you the average annual cost for fuel, and Edmunds offers a Car Affordability Calculator.

Make a list of your needs and wants from a car

Car shopping can feel overwhelming. With so many options, brands, models, and safety features available, making heads or tails on where to start can be hard. I recommend you sit down and consider what you need out of your next car rather than deciding which specific vehicle you want.

Determine how many seats you need, what safety features are important to you, which comfort add-ons would make your life easier, how much space you need, and more. You can rank your needs and wants, creating a prioritized list that will help you narrow down the models that actually meet your needs.

Do your research

Once you've settled on what you need and your budget, "start researching the vehicles that match your family's needs," says Caldwell. Look into safety ratings on sites like the National Highway Traffic Safety Association and the Insurance Institute for Highway Safety. Educate yourself on future fuel and repair costs for the vehicles you're considering. Compare trim levels, prices, and more. When you walk into a dealership, you shouldn't need the salesperson to answer anything for you. Your research should have already independently answered your questions.

The perfect family car today might not be perfect in five years

How long you intend to keep your car is important to keep in mind. "Kids grow up fast, and their needs change rapidly," says Caldwell. "If you're a family vehicle shopper that wants to buy and hold a vehicle for its lifespan, you'll need to think more seriously about future family plans."

For example, not all third-row seating is spacious, and some third rows are too cramped for adults and growing teens. Storage space is another consideration. If you have an infant or toddler, you may need less trunk space than you'd need as they grow and play sports.

Consider if you need an extended warranty

Extended warranties aren't something that everyone needs, but if you're thinking about it, it's best to do your research and make a decision before you head to the dealership. Read more about extended warranty scams, and how to find one that works for you.

Test drive with your kids

While a car might look perfect on paper, and check all the boxes during your research, there is no way to know for sure without getting into it, fastening your kids' car seats, and taking a spin. Your test drive should be at least 15 to 20 minutes and include driving on streets and highways. With the market the way it is, you might not get to test drive the exact color and trim that you are interested in buying, but you'll still get a good feel for the size, space, and driving by just driving the same model from the same or comparable year.

If buying used, get the car inspected

When purchasing a used car, taking it to a mechanic prior to purchase is a critical part of the car buying process. This allows you to ensure that the car is in a condition that's acceptable to you, allows you to budget for repairs the car needs, and of course, gives you leverage when negotiating. If the dealership doesn't want you to take the car off site, services like the Lemon Squad will come to the car.

Buying an Electric Car

"The rise in gas prices for a stretch of 2022 also helped spur demand in electric vehicles," says Caldwell. As more manufacturers ramp up electric vehicle production, the number and variety of electric cars increase yearly. 2023 is no different, with at least 132 electric vehicle models available.

Before jumping into the electric car market, make sure to do your research. "For families considering an electric vehicle, the decision should involve a review of your lifestyle habits," says Caldwell. "Key considerations include range, home and public charging convenience, and other lifestyle considerations."

If you live in an apartment without the ability to install a level-two charger, an electric car may not be the right fit for you. That may also be true for those planning long family road trips without the ability to charge along the way. But keep in mind, electric vehicles cost less to maintain than most people realize, even though there can be some additional costs like installing a charging station at your home.

To offset the cost of purchasing an EV, look into the available federal incentives to buy electric cars which are getting a revamp for 2023 with the Inflation Reduction Act. The tax credit incentives range from up to $4,000 on used electric cars and up to $7,500 on some new electric cars. These tax incentives were just recently signed into law, and clarifications are still being issued. Additionally, your state may have incentives for buying an EV as well.

"For those that know for certain they want an EV in the near future, I'd recommend getting on a reservation list for your preferred vehicle sooner than later since scrambling to purchase at the last minute will 'cost' you in terms of selection and stress," says Caldwell.

How Has Car Buying Changed for 2023?

Be prepared for sticker shock

"You'll likely notice less inventory available on dealer lots as a microchip shortage has left supply low while demand has remained strong," says Caldwell. "This supply-demand imbalance has led to higher-than-normal vehicle prices, especially in the new vehicle market where we witnessed average transaction prices above MSRP for the first time in the industry in 2022." On the flip side, if you have a car that you want to sell or trade-in before buying your next one, it will be worth a lot more money, helping to offset some of the additional cost.

You may need to order your car and wait

Due to the lack of inventory and supply chain problems, certain trim levels and specific options might not be readily available, or available at all. You may find that your local dealership has just a few new cars on the lot, and those, and the incoming stock, may already be spoken for. "Ordering a vehicle in advance and waiting for delivery has become a bigger trend for those seeking particular specs that local dealers may not have available on their lots," says Caldwell.

Interest rates are up

If you've taken advantage of 0% interest deals in the past, you'll find that those have essentially vanished. "APRs are on the rise as Federal Reserve rate hikes throughout 2022 attempted to curb consumer spending," says Caldwell. It's more important than ever to shop for the best interest rate available and negotiate the rate if you're financing through the dealership. An additional half a percent over the course of a five- or six-year loan adds up quickly.

There are more SUVs than ever

SUVs are a popular family vehicle choice and you can expect more of them in 2023. "The trend away from smaller cars and toward bigger SUVs looks to be here to stay, and that competition should be great for family shoppers once the market eventually evens out," says Caldwell. Not every SUV is a good fit for a growing family, so be sure to carefully consider your options and test drive to make sure it's a fit for your specific needs.

So Should I Buy a Car Now or Wait?

"The current market is still unpredictable as there seems to be a wrench thrown in the automotive industry's plans every time we think it's safe to predict a return to a more balanced market," says Caldwell. As you decide when you should buy a car, you'll have to consider a number of factors, including how urgently you need to buy a car and how much are you willing to spend to get it. If you just totaled your car, or your old car just can't hang on any longer, then it's time to start looking right away. But if not, it might be worth waiting it out although there is no guarantee that it will improve this year.

"We expect elevated new and used car prices to remain high through 2023. That said, the used car market does seem to have potential to rebound to more palatable levels for consumers sooner than the new market," says Caldwell. "The new car market will continue to struggle until manufacturers have a steady stream of microchips to build up inventory once again. There is hope this situation could improve in the latter half of 2023."

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This article was originally written for and published on Parents.com and written by Chaya Milchtein - updated on September 7, 2022.l