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  • Yet Another Record:  New Car Prices Now Average $46,000

    Yet Another Record:  New Car Prices Now Average $46,000

    As Americans continue to gravitate towards more luxury models, SUVs and trucks and automakers focus on higher-end trims, the average transaction price (ATP) for a new vehicle keeps climbing. In the latest figures from Kelley Blue Book, the ATP for a new vehicle jumped for a seventh straight month in October, topping $46,000 for the first time.  At $46,036, the ATP for a new vehicle was up 12.9% (or $5,266) from one year ago in October 2020 and up 2.0% (or $910) from September 2021.  At the same time, automaker incentive spending is at a 20-year low.  

    What's Driving Higher Prices


    KBB says with tight supply and continued demand, new-vehicle prices remain up overall. Its researchers say price gains in October were especially driven by higher luxury sales and a richer mix of large SUVs and pickup trucks. Luxury share rose to 16.3% of the total market in October, up from 15.2% a year ago. Luxury buyers paid an average of $61,020 for a new vehicle last month. 

    Also, with the microchip shortage continuing, many automakers are opting to use chips in higher-priced trims.

    Consumers Are Paying More than MSRP


    As of the end of October, KBB data shows that the average new vehicle was selling well above the manufacturer's suggested retail price (MSRP), with the ATP clocking in at 2% above MSRP in October.  Simply put, buyers were paying an average of $800 over sticker price last month. That's a huge difference from October 2019 when transaction prices were roughly $2,300 below MSRP. 

    "Whether they are desperate or impatient, consumers continue to pay hundreds of dollars above the suggested price for new vehicles," said Kayla Reynolds, analyst for Cox Automotive. "While the average transaction price jumped to a new record high, the average incentive package fell to a 20-year low. To score a new vehicle, buyers are accepting no-haggle pricing, with significant market adjustments in some instances. It is absolutely a seller's market right now."

    New Vehicle Inventory Remains Tight


    Kelley Blue Book says total new-vehicle sales increased slightly in October to 1,056,137, a 4.1% month-over-month increase. But sales, however, were down 22.4% compared to one year ago and down 21.0% compared to October 2019. Researchers say high prices may be impacting sales, but it's hard to know for certain with new-vehicle supply remaining so tight.  New-vehicle inventory remains far below healthy levels, and many automakers are steering available microchips to higher-end, higher-margin products. As a result, volumes are depressed, but sales revenue has jumped significantly. 

    Inventory Spending Falls To 20-Year Low


    The other big part of the story is the drop in automaker incentive spending. In October it fell to a 20-year low, dropping to 4.3% of ATP last month, down from 5.6% in September 2021 and well below the 9.1% of ATP recorded in October 2020. Kelley Blue Book says every brand reduced incentive spending month over month. Porsche had the lowest incentive level in October at 1.5% of ATP. Genesis, Land Rover, Mazda, Subaru and Toyota held their incentives to under 3% of ATP; only Alfa Romeo had incentives above 10% of ATP in October.

    What's Next?


    In a volatile market being impacted by unprecedented conditions, the future can be a bit hard to predict. However, the Kelley Blue Book team says it's expecting little relief from high new-vehicle prices in the foreseeable future, as new-vehicle inventory is expected to remain tight through the first half of 2022. The prediction is that automakers will continue to focus on high-revenue products, and the market mix will continue to shift away from more affordable sedans. In October 2021, car share of the U.S. vehicle market dropped to 21.5%, down from 25.7% in October of 2019. Meanwhile, the overall share of pricier SUVs jumped to 52.4% from 49.1%, while pickup truck share increased from 19.3% to 21.3%.


    Photo Credit: Julia Shamayaeva/Shutterstock.com