New cars ain't cheap. After a home, vehicles are typically the second-priciest thing people purchase in their lives, and for myriad reasons they're not getting any more affordable.
Released last week, a joint study from J.D. Power and LMC Automotive indicates the average new-vehicle transaction price in the US last month topped a whopping $41,000, . For reference, this eye-watering number is about 17% higher than it was in July of 2020.
Reduced inventory is a driving factor for this price increase. Thanks to manufacturing issues, a chip shortage and other problems, automakers are building fewer vehicles. Consequently, dealership lots are bare. This product dearth has drastically reduced average manufacture incentives, helping drive new-vehicle prices up. According to J.D. Power and LMC Automotive, the average incentive last month was around $2,065, a decrease of $2,170 compared to July 2020... yes, you read that correctly, it dropped by $2,170.
Naturally, higher prices cost drivers more, but they're great for dealerships and automakers alike. According to this report, the total retailer profit per unit, is set to hit an all-time high of $4,260, which is an increase of $2,230 compared to the same time last year. This is also the first time it's eclipsed the $4,000 mark. Strong sales are expected to increase retailer profits to $5.1 billion, the highest of all time, a figure that's up 216% compared to July of 2019.
Moving through August, these trends are expected to continue. Inventory is projected to remain tight and higher prices will keep some motorists out of the market. Of course, more affluent drivers that are willing to fork over heaps of extra cash for a new vehicle will be paying more for their ride. This is, naturally, not good news for consumers, however, it's great for dealerships and automakers, who are expected to rake in profits.
Of course, it's not just new cars that cost more. Used-vehicle pricing has gone through the proverbial roof. Drivers paid about 17% more for a secondhand car or truck in July of 2021 than they did in the same month last year. On the flipside, trade-in prices are much more favorable, having increased by around 81% to $7,501.