Remember back last spring, when it was shocking news that the average new-car price had reached 40 grand? Good times.
KBB has calculated that the average price of a new car in the U.S. in December was $47,077. That’s up from $46,329 in November.
You probably already know the reasons: the COVID-19 pandemic, supply-chain problems, and a chip shortage, along with automakers who decided to build their higher-profit models in a time of scarcity.
It was certainly news in the summer of 2021 when the average price for a new car crossed over the $40,000 threshold, but now that it’s 2022, car shoppers would probably love to see those numbers on their car’s sticker. That’s because the average new car price in the U.S. in December rose to $47,077.
The new average was noted by Kelley Blue Book, which also calculated an amazingly rapid rate of increase for car prices for the past three years. The average price rose just under $1800 in 2019, then just over $3301 in 2020, and then an incredible $6220 in 2021. That’s the kind of rate of increase that gets you to new car prices hitting $47,077 in December after they climbed to $46,329 in November.
“Today’s environment is essentially unprecedented for the modern auto industry; we have not been in a situation before where demand truly outstrips supply of new vehicles,” Stephanie Brinley, an analyst at IHS Markit, told Car and Driver. “This has created a new pricing dynamic that ultimately results in reported average transaction prices increasing.”
KBB says the two main factors in this price increase are reduced supply and increased demand, which were caused in part by the pandemic and the related chip shortage. But dealers and automakers are taking advantage of the situation as well. Brinley said cars have gotten more expensive in recent years in part thanks to new technology features, as well as more content that comes standard in entry-segment vehicles.
On the automaker side, we’ve heard for months that with the chip shortage limiting the number of vehicles they can build, companies shifted production to high-profit models, which means more cars on more lots were the more expensive trims and models. That meant shoppers who were out looking to buy were faced with inventory that was priced higher than they might expect.
“Higher feature content has been a trend for several years, but in a situation where demand is higher than supply, some automakers have opted to prioritize production of higher-margin vehicles, which can change the mix of vehicles available and contribute to increasing transaction prices regardless of whether the MSRP is changed,” Brinley said.
Dealers did their part, too, by not offering the kinds of discounts shoppers are used to and, in some cases, adding many thousands of dollars in “market adjustment” to the price of a new car. KBB notes that dealer incentives in December—traditionally a good time for luxury vehicle sales—were sitting at about a five-year low.
“The lack of inventory also has enabled automakers to generally reduce the incentive levels, which can also contribute to increases in average transaction prices,” Brinley said. “Also, dealers ultimately set the price the consumer pays. When supply is lower than demand, dealers may set prices higher than MSRP, also increasing average transaction prices.”
We noted recently that used-car prices are climbing, too, with the average used car costing more than $27,500 in December 2021. It’s a similar story for used electric vehicles, where today’s prices are almost 27 percent higher than they were in March 2021. This increase was driven, in part, by the same factors that are raising prices for all vehicles, as well as the “frequent and quiet price increases” Tesla gave its new cars over the past year, according to a new EV trend report from Recurrent, which tracks information about used EVs.
You Might Also Like