What price will you pay for your next vehicle?
Shop for a new vehicle and you’re likely to shell out a lot of cash. If you’re like today’s typical consumer, you’ll pay more than $40,000 for a new vehicle. Indeed, the valuation analysts at Kelly Blue Book said that buyers paid an average of $41,066 in February 2021, up 6.52 percent or $2,515 over February 2020.
“February’s average transaction price performance year-over-year has continued to climb,” said Kayla Reynolds, industry intelligence analyst at Cox Automotive. “On the other hand, month-over-month performance showcases the impact of the luxury and non-luxury mix in the market—with more than half of the luxury vehicle segments reporting drops in transaction prices from January 2021.”
Your Price Varies
What customers are willing to pay varies widely based on the manufacturer mix. In the same survey, Daimler registered an average transaction price of $63,842, well ahead of the BMW Group’s $59,342. On the other side of the pricing spectrum, Mitsubishi averaged just $22,964 or about $7,500 under the next highest manufacturer, Mazda.
Auto Trends has consistently followed price changes and what we see will not bring comfort to anyone. About a decade ago, the average transaction was around $30,000. At the current pace, it will top $50,000 by 2030. If salaries and the cost of living were to keep up, price increases would not be a significant factor. But we all know that will not happen.
We have evaluated more than 500 new vehicles over the past decade and understand what consumers are facing. Typically, manufacturers send us a well-equipped model and we discuss the upper trims with some mention of the lower trims.
Yet, we follow a formula that helps consumers save money, typically thousands of dollars on a vehicle that suits them. Among our suggestions are as follows:
1. Don’t purchase a base model and avoid the top trim.
Most vehicle base models don’t have all the features consumers want these days. Yes, you’ll find a color display, infotainment features, some driver-assist tech, and other favorites, but usually, you need to move up a trim to get what you want. Then, adding a package makes sense, provided it doesn’t push your price equal to the next trim level. As for the top trim, you’ll usually find many more bells and whistles than you need.
2. Shop near the end of the month or year.
Car dealers receive incentives from manufacturers to sell a certain number of vehicles each month. If the dealer hasn’t reached its quota near month-end, they stand to lose tens of thousands of dollars or more in manufacturer holdback cash. You won’t know what the cash offer is, but it often involves hundreds to thousands of dollars per vehicle, over and above the discounts. Timely shopping can put you in the driver’s seat when negotiating your price. Never pay sticker price: you can save thousands of dollars on most vehicles, sometimes more than $10,000 on pickup trucks and certain luxury models.
3. Avoid the extended warranty and other add-ons.
Costs rise for several reasons, including consumers purchasing pricey extended warranties that don’t kick in until years later such as when the manufacturer’s standard warranty runs out. Most of these warranties come managed by third parties and are not backed by the manufacturer. Check out our article, About Your New Car Extended Warranty Plan, as we drill down on all things extended warranty.
4. Price saver: consider a late-model used car.
Although we cover new vehicles chiefly, we understand purchasing new isn’t for everyone. In fact, in our 8 Steps to Buying a Used Car article, we point out how steep depreciation in the first few years of ownership makes buying new a questionable decision (especially for individuals not looking at long-term ownership). Purchasing a vehicle that’s a few years old and still has its original warranty in place may prove the best value of all.
Rising Price Trend
You can also save money on a vehicle by adjusting your requirements. Perhaps instead of shopping for a three-row SUV, a two-row model would meet your needs. Or everything you need in a pickup truck might be available in a midsize model, not a full-size truck.
In all, rising prices aren’t going to stop, especially as the march toward electrification and autonomous driving hasten. That doesn’t mean there won’t be bargains – you simply need to do your research and stick to a budget.