new york
CNN
–
It is called a sticker shock. And if you haven’t been to the dealer showroom before the pandemic, you might want to prepare yourself.
Americans paid an average of $47,612 for their new car in October, according to data from Edmunds. This is a nearly $10,000 jump from October 2019 ahead of the pandemic. This means that new cars are rising much faster than most goods and services.
Price Jump has multiple origin stories. Pandemic Narring Supply Chain and limited essential car parts. Buyers are increasingly fond of larger cars with more features, continuing their decades of shift to larger, more expensive SUVs and trucks.
But much of the reason Americans pay nearly $50,000 for cars is because the automakers have decided to go all-in on expensive cars. The more they charge the car, the more money they make it.
“It’s going to be hard to find anything under $30,000 from an American automaker,” said Ivan Drury, director of insights at Edmunds. “They are hacking the models completely, and basic trim levels are no longer the bulk of the business. They’re raising floor prices.”
Today’s cars come with all sorts of driver assist features, including automatic braking, adaptive cruise control, and blind spot warning systems.
“We’ve seen a lot of experience in the industry,” said Charlie Chesbrough, economist and senior director of Industry Insights at Cox Automotive. “It’s a combination of what consumers want and what the industry is moving on. The market is abandoning the price range below $35,000.”
There are also more electric vehicles and the demand for hybrids is growing, but both are more expensive than traditional gas-only vehicles.
The cheaper cars remaining are generally from foreign brands. Nissan, which sold in the US in the third quarter, averaged $35,362, including sales of premium infinity brands.
General Motors’ traditional big three Ford and Stellantis, sold under the Jeep, Ram, Dodge and Chrysler brands, have effectively abandoned the sedan market to bring a near-perfect focus on SUVs and pickups.
Ford has recently sold only one traditional “car,” a Mustang, a two-door coupe, rather than a family sedan. The final non-soube or pickup Chevrolet will roll off the line this month.
Excluding almost anything that isn’t a big, high-ranking crossover or SUV, the average selling price has been increased to $50,922 for GM, $54,963 for Stellantis and $55,632 for Ford.
The average price has dropped by $142 from a year ago, but it could go up soon.
That’s because high interest rates have kept prices down for the past few years, Drury said. The Federal Reserve has hiked hiking rates to two-year highs to combat inflation, so buyers have had to spend more on paying for car loans. With prices drop, they release cash to spend on expensive features instead.
The average fees for new car loans of 7% in October are far above the early stages of the pandemic. The combination of higher interest rates and higher car prices, and the largest average loan ever taken to buy them, increased the average car payment in October to $742.
“The only thing that stopped them from raising it was the interest rate,” Drury said.
“If the money is a little cheaper, it’s probably going to be $50,000 now,” he said. “If they can buy more cars than they spend more on fundraising, they’re going to do that.”
Prices could go even higher if President Donald Trump follows the threat, particularly in the automobile sector, with the threat of imposing sudden tariffs on imports.
Although details are lacking, even if the tariffs are limited to completed vehicles, the prices of cars built at US factories can be increased by reducing competition from low-cost foreign models.
Additionally, many of the inexpensive models available in US showrooms are imported from here from overseas or from Mexican factories.
You could also slap customs duties on auto parts. And it would make every car built in America more expensive.
“These costs go to the car buyers, and they are not absorbed by car manufacturers or suppliers,” he said.
