Prices high, but automakers still hitting the magic price point

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A sign that reads “The price is right auto sales.”

The record high average price of $30,748 has proven to be right for the U.S. auto industry. (Photo Credit: CC BY-SA/Dustinhallen/Wikipedia)

Average vehicle pricing in the U.S. has hit a record of $30,748, reports the Detroit Free Press. The 6.9 percent increase from last year hasn’t kept consumers away, however. As the industry rebounds, consumers have shown that they will opt for more expensive trim levels and options. Automakers appear to have found the magic price point, as demand has not subsided.

Thinning the herd to healthy levels

A by-product of the automotive industry crash is that numerous automotive dealers were forced to close their doors. Today, there are fewer dealers, and inventory remains relatively low. Consumers looking to replace their older vehicles with newer, more fuel-efficient models are having an easier time of obtaining credit for auto loans. The result is that market competition and the supply-and-demand cycle have helped push auto prices toward a “natural equilibrium,” notes the Free Press.

Further vehicle pricing increases are expected over the next few months, until it levels off until 2013, when the prediction from experts is that prices will rise again.

Low interest rates, high used car prices

People have shown that they’re willing to pay in this seller’s market, notes Alan Helfman of River Oaks Chrysler and Ford dealerships of Houston, Texas.

“Interest rates are low, used car prices are high and people are willing to pay for vehicles with all the amenities. Things are very, very good,” said Helfman.

[Get a good auto loan rate]

The days of waiting for the most attractive incentive, biggest rebate or a cut-rate lease are becoming an artifact of history. Jesse Toprak, vice president of industry trends at, notes that the 15 to 20 percent manufacturer incentive discounts of just a few years ago are now only 5 percent, and demand has driven production. The average manufacturer incentive in March was $2,440.

“Consumers are being weaned off incentives, but not voluntarily,” said analyst Joe Phillippi of AutoTrends Consulting in Andover, N.J. “Nobody wants to pay retail (sticker price), but now they are being forced to pay close to it.”

March auto sales hit 14.4 million, annualized

U.S. annual auto sales rate for March 2012 was up 1.3 million to 14.4 million compared with the previous year.

“Sales do not seem to be artificially inflated,” said Barclays Capital analyst Brian Johnson. “Strong sales were not supported by incentives.”

Hitting the sweet spot

Toprak told USA Today that U.S. automakers have “finally found their sweet spot” when it comes to the balance of incentives and price point. Chrysler was among the sweetest of automakers at finding the balance, increasing the selling price 6.4 percent in March, to $29,842. General Motors was up 3.4 percent to $33,289; Nissan rose 7.4 percent to $28,322; and Korean automakers Hyundai and Kia upped prices the most of major automakers, 9.4 percent to $21,717.


Detroit Free Press

Fox 8 Cleveland

USA Today

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