New car prices continue to climb, currently averaging nearly $47,100

  • Remember last spring when the shocking news was that the average price of new cars had hit 40,000,000? Good time.
  • KBB calculated that the average price of a new car in the United States in December was $47,077. This is up from $46,329 in November.
  • You probably already know the reasons: the COVID-19 pandemic, supply chain issues, and a shortage of chips, as well as the automakers that 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 of a new car passed the $40,000 threshold, but now that we’re in 2022, car buyers would probably like to see those numbers on the sticker. of their car. That’s because the average price of new cars in the United States in December rose to $47,077.

    The new average was noted by Kelley Blue Book, which also calculated an incredibly rapid rate of increase in car prices over the past three years. The average price rose just under $1,800 in 2019, then just over $3,301 in 2020, then an incredible $6,220 in 2021. That’s the kind of rate increase that takes you to new car prices hitting $47,077 in December after climbing to $46,329 in November. .

    “The current environment is essentially unprecedented for the modern automotive industry; we’ve never been in a situation where demand really exceeds supply for new vehicles,” said Stephanie Brinley, analyst at IHS Markit. Car and driver. “This has created a new pricing dynamic that ultimately results in higher average transaction prices.”

    KBB says the two main factors behind this price increase are reduced supply and increased demand, which were caused in part by the pandemic and the associated chip shortage. But car dealerships and manufacturers are also taking advantage of the situation. Brinley said cars have become more expensive in recent years, partly due to new technology features, as well as more standard content in entry-level vehicles.

    On the automaker side, we’ve been hearing for months that with chip shortages limiting the number of vehicles they can build, companies have shifted production to high-profit models, which means more cars on more lots were the more expensive versions and models. This meant that buyers looking to buy were faced with stocks that were priced higher than expected.

    Spencer PlattGetty Images

    “Higher feature content has been a trend for several years, but in a situation where demand exceeds supply, some automakers have chosen to prioritize the production of higher-margin vehicles, which may change the range of vehicles available and help increase transaction prices whether or not the MSRP is changed,” Brinley said.

    Dealerships have also done their part by not offering the kinds of discounts buyers are used to and, in some cases, adding several thousand 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 at around a five-year low.

    “Lack of inventory has also allowed automakers to generally reduce incentive levels, which may also contribute to higher average transaction prices,” Brinley said. “Furthermore, dealers ultimately set the price the consumer pays. When supply is less than demand, dealers may set prices above MSRP, which also increases average transaction prices.”

    We recently noted that used car prices are also climbing, with the average used car costing over $27,500 in December 2021. It’s a similar story for used electric vehicles, where current prices are nearly 27% higher than they were in March 2021. This increase is due, in part, to the same factors that raise the prices of all vehicles, as well as the “frequent and silent price increases” that Tesla has tuned its new cars over the past year, according to a new report on electric vehicle trends from Recurrent. , which tracks information about electric vehicles in use.

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