Tag Archives: vehicle prices

What You Need to Know If Vehicle Shopping

Posted on by
Reply

First the good news, according to Michelle Krebs, executive analyst for Cox Automotive:

“The surge in new car prices appears to have peaked.”

That is the new vehicle average transaction price fell 1.8% in January compared to December.

Now it is “just” $46,404.

But while not exactly an entire shoe dropping, Krebs adds:

“Yet, while we expect vehicle supply to improve, it will continue to be tight particularly through the first half of the year. Because of this, we expect prices to remain high for the foreseeable future, but car shoppers can rest assured we don’t anticipate any more record highs.”

Not records. Just high.

Here’s another thing that probably won’t make you feel much better.

Cox calculates that car shoppers for non-lux vehicles are paying, on average, more than $900 above sticker. A year ago those customers were paying $1,600 or more below sticker.

For those in the lux segment it is a similar story, just higher numbers. As in paying $1,300 above sticker when last year the prices out the door were $2,400 under MSRP.

One way of looking at this is that for non-lux cars customers are paying a $2,500 penalty for waiting (the swing from minus $1,600 to plus $900) and the lux buyers $3,700.

With inflation and rising interest rates, however, it may be a good idea to shop earlier rather than later lest those factors add to the sticker.

Remember: MSRP is “suggested” price, not what you’re going to sign off on.

About that Beater’s Price

Posted on by
Reply

According to Kelley Blue Book, which knows about such things, the average used vehicle price at the close of 2021 was $28,205.

That was 28% higher than it was at the end of 2020.

42% higher than in December 2019.

(One thing that is a little odd about this: Given that there was a decrease in the miles traveled during the lockdown portion of that period, as in, say, people working from home and therefore not driving, wouldn’t you imagine that the demand for used vehicles—yes, we know that the lack of semiconductors reduced the availability of new cars, which put some people into the used market—would have been lower, or is it simply that they could have been much higher?)

Back to that $28,205.

According to the U.S. Census Bureau, the median household income in the U.S. in 2020 (these were the latest figures collected as of September 2021) was $67,521, a 2.9% decrease from 2019.

Let’s say for the sake of argument that there was a 5% increase in 2021 (an arbitrary figure based on nothing).

That would make the median income $70,897.

The average used car would be about 40% of that annual income.

Something to Think About Regarding Vehicle Prices

Posted on by
Reply

By Gary S. Vasilash

Here are some interesting observations from Charlie Chesbrough, senior economist and senior director of Industry Insights at Cox Automotive.

Chesbrough, during a presentation at the Federal Reserve of Chicago’s 28th Annual Automotive Insights Symposium, pointed out that new vehicle inventory at the end of 2021 was 63% below what it was in 2020.

Not a whole lot of inventory on those dealers’ lots.

He said the day supply of vehicles is about 35 days, and that when vehicles show up on dealer lots they get bought up just as quickly as they are dropped off.

What’s more, the average price of a vehicle is MSRP plus something.

In other words, that sticker is a suggestion. The price goes up from there.

What’s more, people are paying more than ever—average transactions at $47,077, according to Kelley Blue Book—and dealers and OEMs are racking up the rewards.

“This is a tight supply situation and I don’t know that the industry is in much of a hurry to change it.”

Why would they?

The Big Spend

Posted on by
Reply

Seems like vehicle buyers are buying—costs be damned

By Gary S. Vasilash

“Importantly, consumer spending will still advance despite higher prices due to pent-up demand and record savings balances.” That’s Richard Curtin, chief economist for the Surveys of Consumers, University of Michigan.

In the survey for May it was discovered that consumer confidence fell compared to the data for April. A concern is with inflation.

According to the U.S. Bureau of Labor Statistics (BLS), the Consumer Price Index was up by 4.2% for the 12-month period ending in the cruelest month. That was the highest rise since September 2008, when it hit 4.9%.

What was a big contributing factor to both the fall in consumer confidence and the increase in consumer prices? Vehicle prices.

In the case of used cars and trucks, the BLS measured a 10% increase in prices—the largest one-month increase since they started measuring back in 1953.

But it seems that shoppers aren’t all that concerned.

According to Cox Automotive:

“Four out of ten consumers are willing to pay above the manufacturer’s suggested retail price (MSRP), and those willing to pay over MSRP are willing to accept a 12% premium.”

Cox calculates that based on the average MSRP for new vehicles in April being $41,950, according to Kelley Blue Book, “many consumers are willing to pay $5,000 over sticker price.”

Somehow politicians are blamed for inflation.

Seems like consumers might have more than a cameo role in this scenario.