With consumers crawling all over crossovers and SUVs, you’d think that automakers would be eager to make some extra cash by generously hiking transaction prices.
Well, automakers might want it, but they certainly aren’t foolish enough to do it. Not in this stagnating marketplace, and not with the importance heaped on that wildly competitive segment. According to Kelley Blue Book, the average transaction price growth in all SUV and crossover segments remains at or below inflation.
However, when it compared transaction prices — minus incentives — in January of this year compared to the same month last year, the research company found that a certain hot-selling segment saw a consistent drop in window sticker value.
The industry as a whole saw transaction prices rise, on average, 3.3 percent year-over-year. Minivan prices, energized by the mid-year introduction of the Chrysler Pacifica, rose 4 percent. Entry-level luxury cars rose 4.8 percent. The rest? Not much to talk about.
Utility vehicles, on the other hand, didn’t come close to the average. Compact utilities saw transaction prices rise a modest 1.5 percent, which midsize models rose by 1.6 percent. Full-size utilities were subject to the largest price increase, though that figure was only 2 percent. On the bottom rung, subcompact crossovers and SUVs actually saw a price decrease compared to last January, dropping 0.6 percent.
On the luxury side, all segments dropped in average price. Compact luxury utility vehicles dropped an imperceptible 0.1 percent, while midsize models fell 0.9 percent. It’s at the top of the range where the difference was greatest — full-size luxury utilities saw average transaction prices that were 2.2 percent lower last month than in January 2016.
The pricing trend seems to jibe with the segment’s popularity.
According to TTAC sales guru Tim Cain, premium auto brand SUV and crossover sales jumped 13 percent to 1.1 million units in the U.S. in 2016. Contrast that with utility offerings from mainstream brands, which grew 7 percent last year. Premium brands – boosted by the introduction of Jaguar, Maserati, Bentley – own 16 percent of the U.S. utility vehicle market.
Automakers rake in big profits from luxury vehicles, especially those capable of hauling generous amounts of cargo. That leaves a cushion to beat off rivals with competitive pricing.
[Image: General Motors]
That is one beautiful Escalade in that picture, Damn
OK, mainstream CUVs are the new Accords and Camrys and CAFE will ensure their height and ground clearance are reduced to match their market dominance.
Meanwhile expensive tall stuff will sell some.
Is that kinda right?
Just wait till Cadillac gets its own version of the Traverse/Acadia/Enclave.
Call it Escalade SFE (Super Fuel Economy).
The auto glut is coming.
This is not some “doomer” prediction about the economy or even automotive-specific trends (I have a separate, complex perspective on the general economic outlook in our era of ultra-low interest rates and preference in legislative/grant/tax policy for capital over labor, no matter how short-sighted that
preference is – in short, it has taken us back into a cyclical bubble-bust pattern, where saturation in new construction – in commercial, office and industrial building, particularly – is one example as to how a now 10-year period of ultra-low rates has led to a misallocation of capital in the form of low-to-negative return investment), but it’s almost a sure bet that auto sales have hit their cyclical highs in NA at a time when production is still ramping up and additional production capacity is being brought online, which also coincides with a sort of dumb (short term thinking) decision 6 years ago to shift 30%+ of new vehicle sales to lease transactions (some manufacturers are on a closer to 45%+ lease model through heavy incentives and artificially high claimed residual values – so the numbers can work NOW),which is already further pressuring wholesale and retail used vehicle prices (and that pressure will intensify given the short 24 month-36 month term nature of auto leasing), which inevitably pressures new vehicle pricing (as used vehicles are viewed as plausible substitutes for new vehicles by a relatively large % of the buying public).
Automakers will soon be faced with even more pressure to decide between cutting prices in real or even nominal means (despite now much higher inflationary input prices at the production and parts supplier levels) which will decimate margins, or cutting production (even to the point of canceling new-build production projects that may have already have already been budgeted for), or if a large enough glut accumulates, having to do both.
The Auto Glut is here.
I just got offered $25k for a 2013 BMW 535xi with the Luxury stuff. Thinking this a lowball from a nationally owned Used To Be Local dealer, my brother got 24k from a locally owned Leafy Green Suburb BMW in NJ. He didn’t even want the car “We just give our lease returns back to BMW we have no idea where they go…, they aren’t worth selling”. Research shows 34k retail all over, but more in the 30K range. The car was close to $70k new, has 26k, and is very clean and fully serviced. I even saw a manual 535 with 101k on the showroom floor for 17k.
Yow ! 535 for less than Accord, if you can afford the repairs.
The C7 is now under $40k, if you believe the vette forums.
I’ve seen VSport CTS for $35k, or half price.
In the real world, you don’t see too many old cars because “if you work, you drive” so while it might be endless Civic and Camry, it’s new enough everyone has bluetooth.
The concept of scarcity for a currently produced car is impossible other than a very few limited German or Italian cars.
My personal barometer is a Jeep/Chryco dealer nearby. They have a big lot below grade. I’ve seen it near empty and when the sales bank requires them to eat cars.
They are good at arrangement, but unless they can put them on the side, the lot is as full as I’ve ever seen.
I agree. The auto glut is already here. Now all we need is jobs, jobs, jobs, to increase the demand for new cars.
Agreed also – would love to see a link for an under $40K C7 — are we talking new or used?
Check cars.com….lightly used C7 for 39k…they are out there.
HDC,
The US has or is reaching full employment.
Wages spiralling up is the next phase.
If you want jobs then the US needs to ramp up immigration. This will put a slight downwards effect on rising wages.
With the high USD and rising incomes the US will find less export markets. Add to this the global negative “Donnie” effect I don’t see as bright a future for US manufacturing.
Another thing to consider will be the associated price increase of US goods and services.
I see a “Bad Moon Arising” for the US.
No Al the US is far from full employment. The official numbers are heavily skewed by those that are under employed and those that have not attempted to return to the work force after being out of work for so long.
Scoytdude,
Even taking into consideration your belief of under employment, which I don’t totally disagree with, the net negative effect on the US economy from rising wages will occur through supply and demand in the job market.
The rising income is already occurring. Look at the data for US wages.
There is currently quite a debate going on in America about how “full employment” is defined. It affects different Americans in different ways.
Obviously, there are at least two camps who interpret those “facts” in totally opposing ways.
I’m very much inclined to give this new administration a chance at their approach to full employment, once they get the entire “team” on board.
The “Bad Moon Rising” for the US IMO is not at all referenced to cars or auto production.
I see it more as an upheaval of the American economic way of life of the past 25 years, or so.
Yeah, some major changes coming. Hope it affects me and mine in only positive ways.
One of my college friends is in logistics, and works for one of the truck transport companies owned by local magnate Matty Maroun (owner of Ambassador Bridge and CenTra, Inc.) and has recently filled me in on how surface lot storage for new vehicles is in short supply; so much so, that e pntire RV/Boat/Camper storage facilities, large sections of mall lots, and other weird locations are being rented by manufacturers and filled completely with new vehicles.
He told me over dinner at Central Kitchen (which he generously paid for compliments of his expense account; I had thought those days were over but he’s clever and the Maroun family loves him, so there’s that) that large acreage-parcels-to-be-balanced-and-graded-with-gravel and ring-fenced is now being purchased in a further effort to store vehicles.
I have zero reason to doubt a single word he tells me. He’s always been spot on.
Sounds about right for luxury sedans today. Check out Edmund’s longterm Lexus GS F-sport that lost 1/3 of it’s value in 18 months or so.
They added a Trifecta tune to it just before auction and it sold for more than their purchase price.
I just want to thank Norm for posting all these years. It’s a thankless task, desperately searching for some way to denigrate Lexus and Acura whilst still leading the cheers for Buick and Cadillac.
I don’t know what mental illness causes you to continually post this silliness, but you always bring a smile to my face, Norm, and I salute you for it.
Norm,
Most prestige and luxury vehicles initially depreciate quickly compared to the lower end of the market.
The more well to do in our society have the means to replace them. Many are business write offs, like 50% of pickups.
The situation becomes supply and demand. These cars must be affordable to the less well heeled.
Lexus is a far better proposition than a Buick second hand, even if the price is lower than you like.
Norm is like Dave Chappell taking a hit of weed laced with PCP from Wayne Brady, driving around in a Trifecta tuned Encore that is getting 57.6mpg, developing 798 crank horsepower, and doing the 1/4 mile in 9.99 seconds while pulling 1.3 Gs on the figure 8.
‘That’s the kiss of the dragon, boyyyy!….angel dust! You just got wet!”
The problem for most luxury utility vehicle brands is that the Vovlo XC90 and Mazda CX-9 are superior to what they offer, at lower prices.
That and the fact that now everyone (even Jaguar!) has one, so with demand outpacing supply, prices fall.
Both are 4cyls. Fail. The Volvo is that fancy turbo/supercharged engine that I simply don’t trust long term, and the Mazda is gutless. Do Not Want either.
@VoGo: Spot on. An X5 simply doesn’t fell much more special than a CX-9. As for the XC90 – it is setting new luxury standards in the $60K price bracket. It simply makes it very difficult to justify an extra $15K for a German brand.
@S2K: I think Mercedes has proven that customers neither care about cylinder count or projected long term reliability.
I think competition is keeping a cap pricing.
A larger selection of SUVs to choose from is great.
I have to think at some point this is a matter of hitting a price ceiling on what even well-heeled consumers are willing to pay for full size SUVs.
They gone far past the rate of inflation, the average Escalade for example probably leaves the dealership at $90k. You;re talking a VERY small amount of people that can afford that type of car.
A Tahoe or Suburban is like $70k-$80k plus these days. These used to be upper-middle class vehicles, not something that was associated with being very wealthy.