It’s not the fault of the car.
October 2019 saw a record breaking $34,217 in the average price of a brand new car. This remarkable increase over December 2018’s record of $33,924, shows that new car transactions prices have been steadily rising despite falling year-over-year. We are left to wonder what is driving the increased vehicle prices.
J.D. According to J.D. Power and LMC Automotive the higher average transaction price is due in part to the cars customers prefer. A staggering 72% of all new cars were SUVs and trucks in October 2019. This is a 2.4% increase in the market share for SUVs and trucks compared to October 2018, and is indicative of the continuing decline in car sales.
J.D. also discovered another interesting data point. J.D. Power and LMC Automotive discovered another interesting data point in the spread of purchase for different price points. “Sales of vehicles below $30,000, which account for 46%, have fallen 7%, while those priced above $30,000 have increased 6%.” This does not necessarily mean that more people are purchasing luxury vehicles, but it further illustrates the dominance of SUV sales. J.D. Power and LMC continue to explain that “The average transaction cost for cars (up 4 percent to $27,739) rises faster than trucks/SUVs (33% to $36,474).”
The average car’s price is well below $30,000 and $10,000 less than that of an SUV/truck, which shows that new cars aren’t driving up the average vehicle cost. The growing demand for SUVs, trucks and other SUVs is shifting the data towards the higher-end because an SUV’s starting price is usually higher than that of a comparable car.
You might think that everyone is buying a new BMW and Mercedes when we look at the average car price in October 2019. They’re instead trading in their mid-sized sedans to get an SUV.