New-vehicle prices have hit all-time highs for the fifth consecutive month, according to a report from Kelley Blue Book. In August 2021, the average transaction price (ATP) for a new vehicle reached $43,355, a 10% increase compared to August 2020. Additionally, prices rose by 1.6% from July 2021.
Despite these record-breaking prices, the automotive industry has experienced a slowdown in sales growth for the fourth consecutive month. In August 2021, car shoppers faced limited inventory, high prices, and historically low incentives, resulting in a total of just 1,092,302 new vehicle sales. This marks one of the lowest monthly totals in a decade and the lowest volume since the initial COVID-19 shutdown in April 2020.
The decline in incentive spending has also contributed to the surge in prices. Last month, incentive spending dropped to 5.6% of ATP, a decrease from 5.9% in July 2021 and well below the 10.1% recorded in August 2020. While Porsche, Genesis, Land Rover, and Subaru had the lowest incentive spend, all less than 4% of ATP, Alfa Romeo, Buick, and Infiniti had levels more than twice the industry average.
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“The automotive industry is still reeling from the extraordinary circumstances of the last year and a half, setting new records seemingly left and right,” stated Kayla Reynolds, an analyst for Cox Automotive. “With ongoing inventory challenges and historically low incentive spending, car shoppers end up being the ones paying the price. New-car prices just continue to climb month after month.”
The surge in average transaction prices can be attributed, in part, to strong sales in the luxury vehicle segment. Luxury vehicle sales accounted for 16.2% of the total market in August, up from 14.4% in the same period last year. Car shoppers paid an average of $58,766 for a luxury vehicle last month. Several luxury brands, including Acura, Cadillac, Genesis, and Mercedes-Benz, saw year-over-year ATP gains of over 20%. Cadillac, in particular, experienced a significant increase of more than 32%, reaching an ATP of $74,332. The new Cadillac Escalade continues to be a popular choice, with over 2,000 units sold in August alone.
Overall, the automotive industry continues to face challenges as prices for new vehicles continue to rise. Limited inventory, high prices, and reduced incentives have impacted sales, leading to the fifth consecutive month of record-high average transaction prices.
FAQs
Q: Why are new-vehicle prices reaching record highs?
A: New-vehicle prices are soaring due to a combination of factors, including limited inventory, high demand, and reduced incentives.
Q: Is the surge in luxury vehicle sales contributing to the increase in prices?
A: Yes, the luxury vehicle segment has seen strong sales, with luxury vehicles accounting for a larger share of the market. This has contributed to the overall increase in average transaction prices.
Q: Are car shoppers paying the price for the current market conditions?
A: Yes, car shoppers are facing the impact of limited inventory and reduced incentives, resulting in higher prices for new vehicles.
Conclusion
New-vehicle prices in the United States have reached record highs for the fifth consecutive month, with the average transaction price surpassing $43,000. As the automotive industry continues to grapple with challenges such as limited inventory and reduced incentives, car shoppers are facing the burden of higher prices. The surge in luxury vehicle sales has also contributed to the increase in average transaction prices. It remains to be seen how these market conditions will unfold in the coming months.