{"id":48971,"date":"2012-04-10T16:07:33","date_gmt":"2012-04-10T20:07:33","guid":{"rendered":"http:\/\/www.thedetroitbureau.com\/?p=48971"},"modified":"2012-04-10T16:07:33","modified_gmt":"2012-04-10T20:07:33","slug":"new-car-prices-hit-all-time-record","status":"publish","type":"post","link":"https:\/\/thedetroitbureau.com\/2012\/04\/new-car-prices-hit-all-time-record\/","title":{"rendered":"New Car Prices Hit All-Time Record"},"content":{"rendered":"
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Strong demand for the Elantra has helped drive up the price of the typical Hyundai product this year.<\/figcaption><\/figure>\n

Remember \u201csticker shock\u201d?\u00a0 After several years of heavily discounting their products in a desperate bid to keep assembly lines rolling, automakers are finding themselves back in the driver\u2019s seat once again \u2013 pushing prices to record levels.<\/p>\n

And it\u2019s \u201cnot a blip,\u201d warns one senior analyst, who expects the trend to continue for several years. The good news for shoppers is that trade-ins are also yielding better prices \u2013 and while that new car, truck or crossover may command more money than ever before it\u2019s also likely to include significantly more features and markedly better fuel economy than the vehicle it replaces.<\/p>\n

The average new vehicle sold in the U.S. in March cost $30,748, according to data tracking service TrueCar.com.\u00a0 That was up from $28,771 a year earlier and marks an all-time record.<\/p>\n

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In the Know!<\/figcaption><\/figure>\n

\u201cIt\u2019s not a blip. It\u2019s a trend we\u2019ve been seeing for months,\u201d said Jesse Toprak, TrueCar\u2019s chief automotive analyst.\u00a0 That\u2019s despite the fact, he says, that \u201cThis might seem counter-intuitive at a time you might expect to see people buying cheaper cars because fuel costs are rising so fast.\u201d<\/p>\n

But there\u2019ve been a number of counter-intuitive trends in the industry in recent months, notably the surge in overall car sales, which have been rebounding faster than the U.S. economy \u2013 despite the fuel price spike that, in decades past, might have been expected to result in a sharp downturn in demand.<\/p>\n

There are a number of reasons why new car prices are spiking.\u00a0 One key reason is \u201cThere\u2019s a better equilibrium between supply and demand,\u201d noted Toprak, \u201cwhich means discounting isn\u2019t needed as much.\u201d<\/p>\n

While March saw vehicle sales surge to an annualized rate of around 14.5 million, that\u2019s a long way from the decade-old industry peak of around 17.1 million.\u00a0 In years past, makers would\u2019ve been tacking on massive rebates and other incentives to boost sales.\u00a0 But in a significant move during the recent recession, many makers slashed production capacity, especially Detroit\u2019s Big Three.<\/p>\n

And so, with the remaining plants operating at or near \u2013 in fact, often above \u2013 their rated capacity, carmakers don\u2019t need to be so generous. March incentives, according to TrueCar, slipped 1.8%, year-over-year, to an average $2,440 per vehicle.<\/p>\n

There\u2019s another reason why the run-up in pricing might seem unlikely.\u00a0 There\u2019s been a significant upturn in the small car market, motorists trading big SUVs for compact crossovers and full-size sedans for subcompacts.\u00a0 Nearly one in four vehicles sold in March fell into the small car category, up from barely one in six as recently as December, according to industry data.<\/p>\n

But don\u2019t think of them as the classic \u201ceconoboxes\u201d that proved so popular \u2013 briefly \u2013 in the wake of the twin oil shocks of the 1970s. Products like the 2012 Ford Focus and the latest-generation Hyundai Accent are far more stylish and well-equipped.<\/p>\n

Consumers, meanwhile, \u201care upgrading the vehicles they\u2019re buying,\u201d no matter what class they fall into, noted Art Spinella, lead researcher at CNW Marketing.<\/p>\n

In the decades that CNW has tracked automotive buying patterns, the typical vehicle will fall into the 50th<\/sup> percentile — almost exactly halfway between the base price of a specific nameplate and the most heavily loaded version.\u00a0 In other words, if the entry model was $20,000 and a fully loaded version was $40,000, the typical buyer would spend $30,000.<\/p>\n

But now, said Spinella, the average vehicle is falling into the 82nd<\/sup> percentile.\u00a0 Using the same example, the typical shopper now drives off in a vehicle costing $36,400.<\/p>\n

\u201cPeople are trying to stuff all the bells and whistles they can in a car\u201d in part, Spinella explained, because \u201cthey plan to keep longer.\u201d\u00a0 Prior to the Great Recession, buyers told CNW they plan to hold onto a new vehicle, on average, about 42 months.\u00a0 That\u2019s now up to 57 months.<\/p>\n

The good news is that buyers aren\u2019t necessarily spending a lot more out-of-pocket.\u00a0 That\u2019s because used car prices have also surged over the last several years.\u00a0 During the first quarter of 2012, the price of the average previously owned vehicle sold through a franchised new car dealer rose 12.5%, or about $1,400.\u00a0 For the consumer, that meant a bigger trade-in allowance to apply to a new vehicle.<\/p>\n

The upward trend in pricing is almost certain to continue, at least barring a sharp setback to the economy, industry analysts agree.<\/p>\n

\u201cThe long-term trend is gradual price increases continuing for several more years as sales recover to 15 million and even 16 million,\u201d forecast TrueCar\u2019s Toprak.\u00a0 \u201cBut the pace (of the increase) we\u2019ve seen over the last several years isn\u2019t sustainable.\u201d<\/p>\n

He anticipates prices will start to level off as they reach an average $31,000.<\/p>\n","protected":false},"excerpt":{"rendered":"

Remember \u201csticker shock\u201d? After several years of heavily discounting their products in a desperate bid to keep assembly lines rolling, automakers are finding themselves back in the driver\u2019s seat once again \u2013 pushing prices to record levels. But, as TheDetroitBureau.com reports, record prices for used car trade-ins help offset the out-of-pocket cost.<\/p>\n","protected":false},"author":2,"featured_media":32835,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","footnotes":""},"categories":[8],"tags":[],"make":[],"post-state":[],"category_old":[151],"acf":[],"_links":{"self":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/posts\/48971"}],"collection":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/comments?post=48971"}],"version-history":[{"count":0,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/posts\/48971\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/media\/32835"}],"wp:attachment":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/media?parent=48971"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/categories?post=48971"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/tags?post=48971"},{"taxonomy":"make","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/make?post=48971"},{"taxonomy":"post-state","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/post-state?post=48971"},{"taxonomy":"category_old","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/category_old?post=48971"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}