Better (1) have lots of cash—or credit—and (2) be flexible in your vehicle choice

By Gary S. Vasilash

According to Kelley Blue Book automobile prices hit an all-time high in July—and affordability hit a 10-year low.

Here’s a number that is undoubtedly making OEMs and dealers happy and consumers not:

42,736

Stick a $ in front of that and that’s the average transaction price—a.k.a., what people actually pay—for a new vehicle.

This, according to KBB, is $3,223 more than it was one year ago and $402 more than in June 2021.

What’s more, incentives are down, therefore accounting, in part, for the decline in profitability.

That is, in July 2021 the average incentive was 5.9% of the average transaction price. In July 2020 it was 10.1%.

And while probably not as crazy as things are in residential real estate, it is a bit of a surprise to learn that the average price paid was above the manufacturers’ suggested retail price.

You read that right: people paid more than MSRP.

Another factor that plays into this price rise is the lack of inventory. While the last time you went out for a new vehicle the dealer lot was probably jammed with new vehicles, nowadays it has the look of a church parking lot on a Monday.