The average price Americans paid for a new car topped $47,000 for the first time in December. The average final transaction price last month was $47,077. The figure caps off a year of unprecedented price increases.
Accelerating Price Increases
During 2019, the price Americans paid for the average new car rose by $1,799.
In 2020, the price Americans paid for the average new car rose by $3,301.
Last year? In 2021, the price Americans paid for the average new car rose by $6,220.
Reduced supply and increased demand explain most of the problem.
The shortage initially was triggered by COVID shutdowns that took out almost three months of vehicle production. A worldwide microchip shortage hit in mid-2021, just as the economy started to get back on its feet after the first phase of the COVID-19 pandemic. Newly vaccinated Americans began spending again, and many sought out new cars. But manufacturers couldn’t find the microprocessors they needed to keep up with demand.
Prices hit record highs over and over throughout the year while the sales pace remained low.
Sales volume ticked up slightly in December. But there weren’t enough sales to trigger dealers to compete with each other through incentives. Dealers continued to hold prices at or near MSRP. Incentives sit near a 5-year low.
More Luxury Cars
But prices didn’t rise just because of low supply. Americans also bought more luxury cars than they usually do.
“December typically is the best month for luxury vehicle sales, and 2021 followed that trend in a big way,” said Kayla Reynolds, an analyst for Cox Automotive. “The result was another record in overall average transaction prices, completely driven in December by the increase in luxury vehicle sales.”
The average price paid for a new non-luxury vehicle last month was $43,072, slightly down from the record high set in November 2021 but still more than $900 over sticker price.
But the average luxury buyer paid $64,864 — a record-setting sum more than $1,300 above sticker.
Affordable Sedans Disappearing
At the other end of the scale, affordable sedans made up a small percentage of sales.
In December 2018, nearly 30% of the new vehicles Americans bought were sedans. In December 2021, that figure slipped to a near-record-low 22.7%.
While it was difficult to find a discount on any new vehicle, buyers were most likely to find one on a new sedan. Incentives made up just 3.9% of the average sale, but 4.5% on new passenger car sales.
Cox Automotive is the parent company of Kelley Blue Book.
