It’s been a strange couple of years across the board, and in the automotive industry in particular. Amidst the tight supply of new vehicles and shifting buyer interests, vehicle prices both new and used have been utterly out of control. The data for last month is now in, with the average transaction price of new vehicles hitting a record high of $45,031 in September, as Kelley Blue Book reports.
Some may be shocked that the average new car in America is now sold for a mid-five-figure sum, but it’s not entirely surprising to those in the industry. The ongoing chip shortage has strangled supply, leaving dealers spinning their wheels and many potential buyers waiting for a return to normality. Indeed, the record comes with a caveat that the number of cars sold dropped 7.3 percent compared to the previous month.
The average transaction price has not been pumped up by a rush of sales, as one would typically expect in a boom period. Instead, a shift has occurred as buyers in the market moved towards purchasing more expensive vehicles. According to Cox Automotive analyst Kayla Reynolds, “Midsize SUV sales jumped in September compared to August, and full-size pickup share moved up as well.”
It makes sense, as automakers are prioritizing high-profit models with limited production capacity available. Meanwhile, Reynolds notes that sales of cheaper compacts and mid-sized cars have dropped off since the summer.
Dealers are cutting down on incentives, too. According to Kelley Blue Book, September saw incentives only counted for 5.2 percent of the final average transaction price, compared to 10 percent 12 months ago. With only a handful of new cars available to sell, dealers are clearly keen to wring out as much profit from each unit as possible. Luxury sales are also up, with brands including Acura, Cadillac, Genesis and Mercedes-Benz growing their average sale price by over 20 percent in the last twelve months.
It’s important to note that this figure reflects the average of actual prices paid for new vehicles in September. Indeed, it’s not that sticker prices suddenly went up. Instead, incentives have gone away and cheaper cars have disappeared from dealer lots. Thus, those left in the market are buying more expensive vehicles and the average price paid naturally rises.
September follows a trend of six consecutive months of record highs in average transaction prices. Expect prices to remain high, and even possibly climb further, until supply issues wane and more affordable vehicles return en masse to the marketplace.
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