New cars sit in the front row and obscure the street view of an empty new car lot at the Toyota of Orange in Orange, California, in November. (Beautiful images)
In today’s installment of the US inflation story – and how new and used car prices are key drivers of it – we hear from car valuation experts Kelley Blue Book , who noted that new car prices had another modest increase in November to hold them back. Record territory. Report KBB The average new car transaction price is up more than 13% compared to November 2020.
People still need cars. Dealers’ inventories are low, largely due to shortage of microchips worldwide and other supply chain issues (plus dealers and automakers increasingly realizing they can maintain smaller inventories in the future). So dealers reacted to that underlying supply and demand situation in a predictable way, by keeping prices at – or above – the manufacturer’s suggested retail price (MSRP).
But perhaps the bookies are playing too much? Sales slowed in November. The month with the slowest sales of the year. Automakers shipped 1,020,355 units to the U.S. in November, the weakest month since the pandemic hit in April 2020. The underperformance can partly be attributed to potential buyers. Trying to shop during the holiday season. However, there is another possible reason.
“High prices and limited choice may be keeping many car buyers on the sidelines,” said the Cox Automotive analyst. Kayla Reynolds. “It’s still a seller’s market and we don’t expect things to change any time soon. However, with high prices now the norm for both new and used cars, it means something.” The exchange value is very favorable and can help reduce the price for consumers when they buy their next vehicle.”
Luxury vehicles have a slightly higher share of the market, with 17.4% of sales and with an average transaction price of $61,455 – and buyers pay an average of about $1,000 more than the MSRP.
ATP for non-luxury vehicles is $43,144 – and buyers pay an average of $900 for stickers.
One reason these numbers are still high: sedans continue to die slowly. A year ago, traditional passenger cars accounted for a quarter of sales. This November, their market share fell further, to 21.7%. So with expensive trucks and SUVs dominating the market, they’re pulling all the averages up:
- Car ($41,026 ATP)
- SUV ($45,201 ATP)
- Vans ($46,523 ATP)
- Vans ($54,462 ATP)
And if you were hoping for this December deals to Remember, forget it. That’s a record low of 4.1% – almost non-existent.
Meanwhile, the scarcity of new cars and high prices continue to push used car prices to sky-high levels. The average retail price of a used car is currently $26,000. And according to the US Bureau of Labor Statistics Consumer Price Index for the last month, as of March 2020 when the pandemic began, the average used car price has increased by 39.8%.
Visit KBB for more details on November new car report.
