Car Purchase During Inflation: Is It Worth It, or Should You Wait?

Inflation, rising interest rates, uncertain economic conditions – many people are wondering if now is the right time to buy a car. In this article, we'll help you make a smart decision during this period of uncertainty.

What you'll find in this article

Illustration: What you'll find in this article

• How inflation affects car prices
• Will prices fall in the future
• Buy now or wait – arguments
• Financing strategies
• Practical tips

How does inflation affect car prices?

New car prices

2020-2024 trends:

• Average price increase: 15-25%
• Reasons: semiconductor shortage, supply disruptions, energy costs

2025 situation:

• Prices have stabilized
• Some manufacturers have started lowering prices (especially EVs)
• But still 15-20% more expensive than pre-pandemic

Used car prices

What happened:

• 2021-2022: prices skyrocketed (20-40%)
• 2023-2024: prices began to fall
• 2025: returning to more normal levels

Current situation:

• Prices ~10% higher than pre-pandemic
• But declining from 2022 peaks
• Supply is improving

Will prices fall in the future?

Arguments FOR price decline

New cars:

• Manufacturing has normalized
• Competition is increasing (especially in EV sector)
• Chinese manufacturers (BYD, MG) are pushing prices down

Used cars:

• More new cars = more used cars in future
• Lease returns will increase supply
• Economic slowdown reduces demand

Arguments AGAINST price decline

Structural factors:

• Manufacturing costs remain high
• Euro 7 standards = more expensive cars
• EV components are expensive

Market reality:

• Manufacturers reduce production to maintain prices
• Cheap cars are disappearing from the market
• Entry-level segment is shrinking

Our forecast

Over the next 1-2 years:

• New car prices: stable or +2-5%/year
• Used car prices: stable or -5-10%

Conclusion: Don't expect a dramatic price drop. Those "waiting for cheaper prices" may wait a long time.

Buy now or wait?

BUY NOW if:

You need a car:

• Your current one is broken/unusable
• You need it for work
• Your family needs have changed

You're financially prepared:

• You have a down payment (20%+)
• Stable income
• Lease payment is less than 15% of income

You find a good deal:

• A specific car at a good price
• Seller is in a hurry
• Good condition at market price

Your current car is expensive:

• Frequent repairs
• High fuel consumption
• Unsafe

WAIT if:

Your car still works:

• Current car is functioning normally
• Repairs are cheaper than buying new
• No rush

Your financial situation is unclear:

• Unstable income
• No savings for down payment
• Large existing debts

You're planning major changes:

• Possible relocation
• Growing or shrinking family
• Job change

You want a specific model:

• Waiting for a new model release
• Want a specific EV with better range

Financing strategies during inflation

Interest rate trends

2023-2024: Highest rates in a decade 2025: Started declining, but still higher than 2020

Typical lease interest rates:

• 2020: 3-5%
• 2023-2024: 7-10%
• 2025: 5-8%

Strategy #1: Larger down payment

Why it works:

• Smaller leased amount = less interest
• Lower monthly payment

Recommended: 20-30% down payment (instead of minimum 10%)

Example (€20,000 car, 5 years, 7% interest):

Strategy #2: Shorter term

Why it works:

• Less time = less interest
• Get out of obligation faster

Downside: Higher monthly payments

Example (€16,000 lease, 7% interest):

Strategy #3: Cheaper car

Reality: During inflation, it's smart to adjust expectations.

Instead of €25,000 car – consider €18,000:

• Lower payments
• Less stress
• More budget flexibility

Strategy #4: Used instead of new

New car depreciation:

• First year: 15-25%
• First 3 years: 35-45%

Strategy: 2-3 year old car with low mileage

• Already through major depreciation
• Still has manufacturer warranty
• 20-30% cheaper than new

Practical tips

Illustration: Practical tips

Budget rule

Car price should not exceed:

• 50% of annual income (purchase)
• 15% of monthly income (lease payment)

Example:

• Annual income: €30,000
• Maximum car price: ~€15,000
• Maximum monthly payment: ~€375

Emergency situations

If your current car breaks down and you have no money:

1. Cheap temporary solution

   • €2,000 - 3,000 car
   • Will let you save for better

2. Small loan

   • Buy an inexpensive car
   • Lower risk than expensive lease

3. Short-term rental

   • While situation stabilizes
   • Expensive, but no long-term commitment

Negotiating power during inflation

What's changed:

• 2021-2022: Seller's market (they dictate)
• 2025: Buyer's market (you have power)

Take advantage:

• Many dealers are struggling to sell
• Negotiate more boldly
• Ask for additional extras

Learn more about negotiating: How to negotiate when buying a car

Electric vehicles vs traditional cars in inflation context

EV prices

Trend: Prices are FALLING

• Chinese manufacturers (BYD, MG) are pressuring the market
• Tesla is lowering prices
• Battery costs are decreasing

Strategy: If you're considering an EV – now is a good time. Prices are falling, supply is increasing.

Traditional cars

Trend: Prices STABLE or rising

• Euro 7 will increase manufacturing costs
• Manufacturers shifting to EVs
• Model selection shrinking

Strategy: If you want petrol/diesel – don't expect dramatic price drops.

Scenario analysis

Scenario A: Buy now

Assumptions: €15,000 car, 20% down, 5 years, 7%

• Down payment: €3,000
• Monthly payment: €237
• Total cost: €17,220
• You have a car NOW

Scenario B: Wait 2 years

Assumptions: Prices fall 10%, rates drop to 5%

• Car price: €13,500
• Monthly payment: €203
• Total cost: €15,180
• Savings: ~€2,000

BUT: You won't have a car for 2 years (or current one costs extra)

Scenario C: Wait 2 years, but prices don't fall

Assumptions: Prices stay same, rates 6%

• Car price: €15,000
• Monthly payment: €232
• Total cost: €16,920
• Savings: ~€300

Conclusion: You risk 2 years for minimal savings.

Frequently asked questions

Will car prices fall in 2025-2026?

Used car prices are likely to decline slightly (5-10%). New car prices will likely remain stable. Don't expect dramatic drops.

Is it worth leasing with current interest rates?

If you need a car and can afford the payments – yes. Increase your down payment to reduce the interest burden. Rates have already declined from 2023 peaks.

What's better during inflation – new or used?

A 2-3 year old used car is usually the smartest choice. You'll avoid the biggest depreciation, and prices have already fallen from their peak.

Is it worth buying a cheap car and waiting for better times?

This can be a good strategy if your current car is unusable. A €3,000 - 5,000 car can serve you for 2-3 years while the economic situation clarifies.

Conclusions

Our expert recommendation

Inflation and economic uncertainty shouldn't paralyze your decisions:

Golden rules:

1. If you need a car – buy one

   • You can't "postpone" necessity
   • Adapt to your budget

2. If you can wait – wait, but not too long

   • 6-12 months can improve conditions
   • Longer waiting – no guaranteed results

3. Financial health matters more than timing

   • 20%+ down payment
   • Payment less than 15% of income
   • Emergency savings after purchase

4. Used car is the smartest choice

   • Less depreciation
   • Lower risk

The best strategy: buy when YOU need it, not when the "market is perfect" – because the perfect moment never comes.

Need help choosing a car within your budget? Contact WheelStreet – we'll help you find the best option for your situation.

Also worth exploring:

• 🔍 WheelStreet car selection – find the best value
• 💰 Lease calculator – calculate your monthly payment
• 🚗 Used cars at WHEELSTREET – cars with warranty
• 🏆 Car financing methods 2025 – how to finance
• 📚 Depreciation — glossary
• 📚 Lease — glossary

Buy from Lithuania

Looking to buy a quality used car from Lithuania? WHEELSTREET offers professional car sourcing with full inspection, history check and cross-border delivery across Europe. Browse verified inventory at WHEELSTREET Used Cars or request a custom car search at Car Sourcing Service.