It has almost never been so difficult to buy a new or used car in the United States as it is today, despite improvements in supply issues and inflation starting to stabilize.
The final purchase price of vehicles – the price you actually end up paying after any dealer discounts or markups – has risen more and faster since 2020 than at any other time in over 35 years, according to recent data from the Bureau of Labor Statistics (BLS).
Consumer price indexes for new and used cars – the average changes in vehicle purchase prices – are much higher than they were four years ago (2019).
However, BLS data shows that inflation for used cars has been cooling dramatically since December 2022. Still, used cars have a long way to go before approaching 2019 sales prices. New car prices have not yet slowed down.
The average transaction price of a new car jumped nearly $12,000 in the last five years, according to data from the automotive site Edmunds.com. For used cars, the average transaction price is still nearly $9,000 higher than in February 2018.
Consumers have not seen price increases like these since the 1970s and 1980s. What makes the 2020s unique is how much car prices have risen in a short period. In the worst 12 months of the used car market during the pandemic, the index rose 45%. There has never been a 12-month period with such high inflation since the BLS began keeping records in 1947.
Recent price trends have been similar across various regions of the United States, although in some areas prices have risen more than in others. Preferences for more expensive vehicles in some areas drive these regional differences. For example, there is a large market for pickups and SUVs in the South, where BLS data shows that new car transaction prices have not risen this much since 1987.
The average price of a large pickup nationwide rose to $62,430 in 2022, according to Edmunds.com. The average price of a midsize pickup was $31,381.
The road to more reasonable prices for new and used cars remains full of potholes.
Consumer tastes have shifted towards larger, more expensive SUVs. This trend drives up prices but also creates incentives for automakers to produce larger cars. The used market is still affected by the decline in lease trade-ins and rental car companies competing with consumers for the same limited supply of vehicles over a period of three to five years.
Source: CNN Business