Car Prices May Be on the Decline, But Shoppers Are Still Paying Extra To Get the Vehicle They Want
The recent dip in auto prices in the United States might have you ready to hit the nearest car lot, but be advised: You might still have to pay extra for the vehicle you want.
Many car shoppers are still paying above the manufacturer suggested retail price (MSRP), even in a market where overall sales prices are falling. For that, you can thank the usual laws of supply and demand. Vehicles in short supply and high demand continue to command prices well above the MSRP.
In September 2022, average new-vehicle transaction prices fell slightly from August but “still remain elevated and well above sticker prices,” according to Kelley Blue Book.
A recent analysis from Consumer Reports indicated you can “forget about saving money off the sticker price” on popular cars, SUVs and trucks. Some are in such high demand that consumers are paying 20% or more above the MSRP.
This is particularly true for Kia models. As Consumer Reports noted, the Kia Rio has been selling for 24% above the MSRP. Other Kia models with elevated sales prices include the Sportage (21% above MSRP), the Sorento (21% above MSRP) and the Telluride (20% above MSRP).
Used Cars Also Commanding Premium Price
The situation isn’t much better for used cars. In September, used vehicle wholesale auction prices declined 1.3% from the previous month and were flat vs. September 2021, Forbes reported. However, used car prices charged to consumers remain much higher than they were before the COVID-19 pandemic and are likely to stay elevated for years to come, according to industry analysts.
Price Factors Driving New Car Cost Increases
The purchase price consumers pay for new cars is driven by four main factors, according to Cox Automotive: inventory availability, manufacturer incentives, dealer discounts and the value of the vehicle you trade in, if applicable.
Automakers and dealers haven’t had to roll out a lot of incentives or discounts over the last 18 months or more because of the combination of limited supplies and heavy demand. Nearly every new vehicle was either presold at full sticker or sold within a week of delivery, Cox noted.
That could change as more supply hits the market. New vehicle inventories across the industry rose by more than 200,000 units in September 2022 to their highest level since June 2021.
That’s good news if you want to buy brands such as Buick, Jeep and Ram, which have inventory supplies ranging from 75 to 85 days. But Kia, at a brand average of only 19 days of supply, can continue to charge well above sticker price.
“For some volume brands like Honda, Kia and Toyota, new inventories remain very tight in the 20-to-30 days’ supply range and ‘deals’ are nearly impossible to find,” Cox Automotive declared in a recent report. “Brands like Chevrolet, Ford, Hyundai and Nissan are running closer to 40-to-60 days, which was the industry desired availability goal for years.”
But, if you’re looking for the best selection and deal, Cox advises heading down to the local Jeep or Ram dealer, “where they are offering 0% for 48 months or 2.9% for 72 months on select models.”
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