Car prices are at an all-time high. Cash rebates and incentives are evaporating in front of our eyes. U.S. consumers are paying 11 percent more on average for a new vehicle, to a record $28,341, up from $25,505 on average in 2008. Yesterday, J.D. Power presented the inflationary news to car dealers assembled in Las Vegas for the National Automobile Dealers Association convention.
Dealers applauded.
Cash rebates and other incentives have dropped by more than $400 since 2008, to $2,680 from $3,018, reports the Wall Street Journal from the conference.
Adding insult to higher prices, the customers are getting the blame. They drive the average price higher by purchasing more features like in-vehicle entertainment, it is said. Auto makers follow the trend, add the features as standard, and raise the price.
Cars are still dirt cheap in the US, as is petrol.
Yep, just having moved to Canada, I long for the days of so-called inflated US car prices. Car’s here are easily 10-20% more.
Oh well, at least it’s not Europe or Australia prices.
Got to be careful comparing prices direct between countries and currency conversions. The best way is to pick the same vehicle for sale in both markets and then work out how many average weekly wages it takes to purchase said vehicle. I did the exercise when the G8 was being sold in America for approximately $19,000 australian when the australian was $36,000. When the average wage calculation was introduced it fell to approximately 28 weeks wages for the Australian edition and about 26 weeks wages for the US edition. The same would probally apply to most vehicle. the difference is what the market will bear for said vehicle.
Carmakers have made base and mid-grade model cars look and feel so unattractive that trim upgrades are almost essential compared to a decade ago.
Reasonably attractive cloth seats are nearly unobtainable in mainstream cars. For example, the only reasonably palatable seat in a Hyundai Elantra is the leather one. The cloth seats are made out of granite or something.
Sorry, but these ARE the good old days. Friends of my parents bought a 1975 Biscayne, then new. Talk about a ‘stripper.’ Power steering was optional on entry level vehicles until well into the ’80s.
And could it be the new mandates for 18 airbags, stability control, ABS, traction control, etc. that was enacted in, what – 2008, that made the prices on the base vehicles jump? On a $10,000 car, all that safety equipment is relatively expensive.
I’d still say that a reasonably equipped, ‘average’ model compares very well to its counterparts of 30 or 40 years ago.
Entry level vehicles used to be light enough, and have narrow enough tires, that power steering ought damned well be optional. The NSX (hardly an entry level car) was released sans power steering, and hardly suffered for it.
And how are “new mandates for 18 airbags, stability control, ABS, traction control, etc. that was enacted in, what – 2008, that made the prices on the base vehicles jump…” the Good days? Just so that insulated upper middle class meddling busybodies can tell each other how good and safety minded they are, by pricing those less fortunate out of the new car market altogether, or ensuring the car they do buy is expensive enough to price them out of the new car market altogether?
@carbiz
I’m used to base model cars not having features, but some of the seats and plastic trim in modern strippers are simply unusable.
Chipboard laminated with vinyl, vinyl seats, and black rubber floors were luxurious compared to the crap on modern base models.
I think the example shown is not the best one, as the 2011 T&C is a big improvement over the 2006.
Sounds like a Toyotathon Celebration down at the dealership.
Considering that total car sales are still down, it could just be that the people that once bought inexpensive cars can’t buy new anymore. Incidentally, going with a friend to test drive the Hyundai Genesis 5.0R was revealing. The car wasn’t good, but the dealer was exceptional. Also, he said that Hyundai can grant anyone tier one financing, siting the example of someone he got financed at tier one with no credit and a cosigner out of state who had a 640 credit score. That might be where their volume is coming from.
Agreed. When I bought my last car and financed it, I was shocked that every dealer considered me a top-tier credit. I’m not a disaster – low 700s – but compared to shopping for a home mortgage, auto credit and ultra-low interest are being thrown around like confetti to make a sale.
I wonder if they’ve decided that anyone who hasn’t had their credit rating not augured by a foreclosure or bankruptcy in the financial bloodbath is probably a good risk at this point. The Great Recession did kind of take care of that.
I am deeply suspicious of the price data, but assuming it’s accurate or roughly so, consider that:
1) There had been pent up demand building since 2008, which say annual U.S. car sales fall to around 10 million from the 17.1 million sold in 2006 (2009, 2010 and even 2011 were all far below 2006 levels, as well).
2) Easy credit is most definitely back in auto sales, partly due to government intervention. I know this to be the case, and I can attest to the fact that General Motors and Chrysler sales of late have been driven in a big way by being able to get people with very low FICO scores approved for loans, whether on a purchase or lease (Cadillac was approving Tier I AND Tier II customers for their CTS blowout in January). We’ll see what affects selling more cars to people with bad credit (again) has in the coming months and years.
3) To the extent average new transaction prices have risen, there’s no doubt that more available options, especially in the gadget/electronic/entertainment category, are costly add-ons, that those dealers surviving the culling in 2008 and 2009 now have fewer competitors within their territory to deal with, and that automakers (thus far) have managed their productions and inventory levels in a disciplined fashion (although there’s evidence of channel stuffing starting to take place again).
I am not sanguine on the health of the economy. While credit conditions have improved and there has been stabilization of what was a plunging economy, much of the reported good economic news of late doesn’t look nearly as rosy upon close examination and a peak under the hood.
Having said all of this, there’s no question that the reduction in vehicle dealers and vehicle supply has helped to offset the significant drop in consumer demand for new cars and trucks, and that far more options are now available to and desired by the consumer (even ones with poor credit), who are finding it easier to obtain financing.
I believe 2013 is going to be a volatile year, as the money printing by the Fed has a tendency to slow post Presidential elections, if history is any guide.
For what it’s worth, I’ve helped two relatives purchase new cars recently, and they both were able to purchase these vehicles for significantly less than I expected (one purchase was for just under 19k on a vehicle that had a MSRP of nearly 24k, and the other was for about 33k on a vehicle that had a MSRP of 41k).
If prices are up due to high-margin adders like entertainment stuff, then I’m not sympathetic. Consumers are driving this, just as they do the salaries of professional athletes.
Leasors at lease end would probably be better off buying then selling privately and pocketing the profit than handing it the dealer.
It’s pent up demand. We are buying our first new car since 2004 this month.