The average price paid for a new car in August was $49,077, according to Cox Automotive and Kelley Blue Book. That number is up 0.5 percent from the month before and 2.6 percent from a year earlier. It was also the largest year-over-year gain in Average Transaction Price (ATP) in more than two years. The average new-vehicle MSRP has similarly grown to $51,099 in August, which represents a 3.3 percent increase from both July and August of last year.
Part of the reason the ATP is growing is that automakers are increasing prices while at the same time slowing down their spending on incentives. KBB reports that of the 31 major automotive brands it tracks, 26 had prices in August that were higher than they were 12 months ago, and 17 had increased their prices by more than 3 percent. On the flip side, incentive spending fell from 7.3 percent in July to 7.2 percent in August.
The most significant factor increasing the ATP of new vehicles is full-size pickups, particularly electrified ones, as EV and hybrid pickups are generally more expensive than their gas-powered counterparts. Four of the top ten best-selling vehicles in the U.S. are full-size trucks, and their average transaction prices in August were far higher than the overall average.
The Ford F-Series is the best-selling vehicle in the U.S. and saw an ATP in August of $66,934. It was followed by the Chevrolet Silverado with an ATP of $61,023. The GMC Sierra was seventh in sales with an ATP of $70,150, and the Ram 1500 landed ninth with an ATP of $65,849.
There are other forces at play too, including the death of the federal tax incentive for EVs that occurs on September 30. New EV sales are increasing in the short term in the lead-up to losing the $7,500 incentive. At the same time, the federal government’s tariff-heavy international trade policy is increasing costs for automakers, which will increasingly be passed on to consumers as manufacturers find themselves unable to absorb the added expense.
Hearing that the average price of a new car is nearly $50,000 hit our ears like a sledgehammer. Four and a half years ago, it was in the low-$40,000 range. Just 10 years ago, it was below $35,000.
It’s not just that cars have gotten more expensive. The number of affordable new cars for sale has also plummeted, with many automakers having quit selling passenger cars in favor of more expensive trucks and SUVs. Consumers also seem willing to sign on to ever-longer loans and pay ever-increasing monthly payments to own the latest and greatest.
A breaking point would be expected in the near future, but there are no signs of one emerging. At some point, consumers should stop buying that new car in favor of a used one or holding on to their current vehicle for years longer than they otherwise would. Automakers may also come up with new affordable vehicles, which is the motivation behind the Slate EV truck, the third-generation Nissan Leaf, and Ford’s upcoming midsize electric truck. Yet in the meantime, that ATP keeps on climbing.
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