What Gets Cheaper in a Recession (And How To Benefit)
Fears of a recession have been looming, and economist Stephanie Pomboy has been sounding the alarm that one has been coming for months.
“There’s a lot of pain ahead of us, both for the economy and this reckoning for the markets that have been really behind the curve, like the Fed,” she said on the Fox News program “Mornings with Maria.”
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If the U.S. is hit with a recession, higher unemployment rates could prompt people to stop spending money on things that aren’t household necessities, driving the costs of certain goods and services down. According to experts we spoke with, here are three things that would be cheaper and how to take advantage of the reduced prices.
Cars
While a car is a must-have for most people, it’s also a big ticket item that Americans put off buying in an economic downturn. According to Rob Dillan, automotive expert and founder of EVhype, new vehicle sales plummeted almost 40% during the 2008 recession, and sales dropped $107 billion for new personal vehicles that year.
However, a recession could be the time to buy because dealerships don’t want to sit on inventory. They must sell cars to make money, so hefty price tags are often slashed, and prices are already cooling, Dillan said.
“The market for used EVs has also experienced a price reduction, with some models available for as little as $10,000," Dillan explained. "This trend, however, poses challenges for owners who purchase EVs at elevated prices, as their vehicles are depreciating rapidly.”
How To Take Advantage:
End-of-year sales: Dealerships are notorious for clearing out older inventory to make room for the newest vehicles, reducing the cost of current models.
Finance deals: “Interest rates may drop, and dealerships often offer low or even 0% financing, making new cars more affordable by reducing total loan costs,” Dillan explained.
Cash rebates: “These direct reductions in purchase price can range from a few hundred to several thousand dollars, depending on the vehicle and timing,” Dillan said.
Lease Offers: “Dealerships eager to move inventory may offer attractive lease deals with low monthly payments and minimal upfront costs,” Dillan said.
Trade-in bonuses: “Additional incentives for trading in an old vehicle can further reduce the purchase price of a new or used car,” Dillan said.
Real Estate
Homebuyers have seen increased prices for a few years, forcing many to sit on the sidelines, but a recession could drop costs.
“For buyers, the impact can be mixed; interest rates might drop, encouraging some buyers to enter the market, but economic uncertainty related to job stability and finances might lead others to hold off,” Kimberly Misita, director of sales with the Saritte Harel Team, told us. “For sellers in most markets, home prices would be expected to come down."
How To Take Advantage:
Lower mortgage rates: The Fed might lower interest rates to help stimulate the economy during a recession, so look for lower rates.
More negotiating power: Demand for housing can decrease, keeping houses on the market longer. Look for eager home sellers because you’ll have more bargaining power.
Travel
Vacations are typically cut from budgets and are one of the first things to go as people scale back from spending. But that doesn’t mean you have to completely deprive yourself and not enjoy a trip here and there. Traveling can actually be cheaper when there’s a recession.
“The demand for travel and hospitality services typically declines as consumers cut back on discretionary spending,” Sarib Rehman, CEO of Flipcost, said. “To attract customers, airlines, hotels and travel agencies often lower their prices and offer more promotions.”
How To Take Advantage:
Off-season discounts: Book trips during off-peak times, when rates are lower.
Last-minute deals: If your dates are flexible, booking at the last minute can save you money.
Subscribe to mailing lists: “Sign up for newsletters from travel companies. They can provide access to exclusive discounts and flash sales,” Rehman said.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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