Rhode Island car buyers have been facing high prices in the used car market for more than a year, partly due to high demand and low inventory. However, there is some good news for car shoppers in 2023. As the demand stabilizes and the inventory improves, prices are expected to ease, and consumers can expect to see a reduction of up to 10% in used car prices, according to Joseph Gunther IV at Gunther VW Fort Lauderdale.

The current average price for used cars in Rhode Island is $32,789 but Gunther predicts this price will drop to $29,510 later this year, providing Rhode Island buyers with savings of up to $3,279. Gunther adds that the supply of vehicles on dealer lots is expected to increase as inventory increases, which is good news for car buyers.

New car prices, on the other hand, are still historically high, with the average transaction price reaching a record-breaking $48,861. However, it was the first time since July 2021 that the average paid price fell below the average manufacturer's suggested retail price (MSRP), indicating that some buyers can negotiate a lower price for vehicles.

However, rising interest rates could offset the decline in vehicle prices, which means that Rhode Islanders who finance their cars may not see much relief. In December, the average interest rate on used car loans was 12.37%, up from less than 10% a year before.

The increase in new car prices is due to the rising cost of raw materials and the shortage of computer chips used to control a vehicle's gas pedal, transmission, and touch screen. This has led to an increased demand for less expensive used vehicles.

The ultimate determining factor for how much prices will decline will depend on factors such as the war in Ukraine, which has exacerbated supply chain interruptions, and the chip shortage.