- Remember back last spring, when it was shocking news that the average new car price reached 40,000? Good times.
- KBB calculated that the average price of a new car in the US in December was $ 47,077. That’s more than $ 46,329 in November.
- You probably already know the reasons: the COVID-19 pandemic, supply chain problems and a chip shortage, along with carmakers deciding to build their higher-profit models in a time of scarcity.
This was definitely 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 buyers will probably want to see those numbers on their car’s sticker. This is because the average new car price in the US rose to $ 47,077 in December.
The new average was noted by Kelly Blue Book, which has also calculated an incredibly rapid rate of increase for car prices over 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. This is the kind of rate of increase that brings you to new car prices reaching $ 47,077 in December after reaching climbed to $ 46,329.
“Today’s environment is essentially unprecedented for the modern automotive industry; we have never before been in a situation where demand truly exceeds the supply of new vehicles,” said Stephanie Brinley, an analyst at IHS Markit. Car and Driver. “This has created a new price dynamic that will eventually lead to reported average transaction prices increasing.”
KBB says the two main factors in this price increase are reduced supply and increased demand, which was partly caused by the pandemic and the related chip shortage. But dealers and car manufacturers are also taking advantage of the situation. Brinley said cars have become more expensive over the past few years, thanks in part to new technological features, as well as more content coming standard in entry-level vehicles.
On the car manufacturer side, we have been hearing for months that with the chip shortage limiting the number of vehicles they could build, companies shifted production to high-profit models, meaning more cars on more lots were the more expensive finishes and models. This meant that buyers looking to buy had to contend with stock being priced higher than they would expect.
“Higher feature content has been a trend for several years, but in a situation where demand is higher than supply, some car manufacturers have chosen to prioritize the production of vehicles with a higher margin, making the mix of vehicles available can change and can contribute to increasing transaction prices regardless of whether the MSRP is changed, ”Brinley said.
Dealers have also done their part by not offering the kind of discounts that buyers are used to and, in some cases, adding many thousands of dollars’ “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 at a low of around five years.
“The lack of inventory has also enabled automakers to reduce incentive levels overall, which could also contribute to increases in average transaction prices,” Brinley said. “Traders also ultimately determine the price the consumer pays. When supply is lower than demand, traders can set prices higher than MSRP, which also increases average transaction prices.”
We recently noticed this used car prices also rise, with the average used car costing more than $ 27,500 in December 2021. This is 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 increase prices for all vehicles, as well as the “regular and silent price increases” that Tesla has given. new cars in the past year, according to a new EV trend report from Recurrent, which tracks information on used EVs.
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