Automakers expect next wave of vehicle buyers won't trend toward high-end options
DETROIT — Americans are paying record prices for new cars and trucks, and they have only themselves to blame.
The average sale price of a vehicle hit $31,252 last month, up almost $1,000 over the same time last year. The sharp increase has been driven by consumers loading cars up with high-end stereos, navigation systems, leather seats and safety gadgets.
It's a buying pattern that began about two years ago with low interest rates that let buyers choose pricier cars while keeping monthly payments in check. And automakers have offered cheap lease deals that include fancy options.
Add in booming sales of expensive pickups, and you get record high prices.
But those conditions could soon change. Although sales are expected to keep rising, automakers say the next wave of buyers who replace older cars will be more cost-conscious, shunning expensive radios and cushy seats to reduce payments. Ford is starting to see that trend in pickups, and is adding a lower-priced model to its top-selling F-Series line.
Most car buyers shop based on expectations for a monthly payment, with the average running about $450, said Jesse Toprak, senior analyst with the auto pricing website TrueCar.com. Since bank interest rates run as low as 2 percent and automakers offer no-interest financing, buyers have a choice between a lower payment or a nicer car. Unlike rising mortgage rates, shorter-term auto interest rates have remained fairly stable.
“If you can keep your payment the same and get more car, most consumers in the U.S. just get more car,” said Toprak, who calculated the record average price.
The average price, he said, went up about $1,400, or 4.5 percent, in the past two years, far faster than normal.
The result is a dream scenario for automakers and car dealers: People are paying record high prices just as demand returns to levels not seen since the Great Recession.
It's also a dream for people like Zachary Bier, a 26-year-old engineer and sales representative in New York City who just leased a $52,000 BMW 335i to replace a 3-Series with an expiring lease. He set out to match his old $650-per-month payment with hopes of getting more features.
For the same payment, he got metallic black paint, upgraded leather seats with red trim and stitching, Bluetooth technology to link his phone to the car, a heads-up display that projects his navigation system and other data onto the windshield, and electronic blind-spot detectors, he said.
“I guess I was surprised based on the sticker price that this car has so much more,” he said. “For everything that comes on this, I feel like it's a better car.”
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Kennametal profits drop more than half in fiscal fourth quarter
- Post-Gazette offers voluntary buyouts in bid to avoid layoffs
- Range Resources cuts workforce 11%
- U.S. Steel CEO expects rebound
- GNC sales, profits slip in second quarter
- Bayer sets sights beyond aspirin
- Travelers find direct Web route to Priory’s spirited past in North Side
- PPG puts brand 1st in strategy to reach commercial paint market
- Muni bond funds stressed
- Voice-assisted technology raises privacy concerns
- Plastics propel Bayer’s 2Q earnings