(The Car Connection) — The average new car price is set to reach $46,259 by the end of August, eclipsing last month’s record and the one before that, according to the latest sales forecast from J.D. Power.
New car prices breaking records has become a broken record for car shoppers in the past year. The average transaction price customers paid for a new car was $45,844 last month, up from more than $41,000 a year ago. The automotive research firm and consultancy estimate the highest new car price on record was an increase of 11.5% from last year.
The usual suspects of the global microchip shortage and other supply constraints have resulted in demand still outstripping supply.
“This August, the industry is still constrained by insufficient inventory to meet robust consumer demand,” Thomas King, president of J.D. Power’s analytics and data division, said in a statement. “The result is a retail sales pace that fails to fulfill its potential.”
The estimated sales volume for the year for both retail and fleet customers is projected to be 13.3 million vehicles, down from the 17 million pre-pandemic highs. Fleet sales will be slightly higher this year than last year, while retail sales are projected to be a fraction lower.
The lack of volume is more than being made up for by high margins on more expensive models. Many automakers are either delaying base models or discontinuing entry-level grades in favor of better equipped and higher-priced models. Shoppers continue to buy higher-priced trucks and SUVs. Together, trucks and SUVs will account for more than 78% of new car sales in August.
Dealers continue to benefit with an average profit of $4,976 on each car sold. That’s down from $5,123 in June but still up $639 from last year and way higher than the pre-pandemic expectation that hovered around $2,000.
Car shoppers keep paying more. The increases come amid prevailing trade winds meant to tame inflation, such as higher car loan interest rates. But robust demand powers through the economic rationale, leading to the highest monthly loan payment on record of $716. That’s an increase of $78, or 12.2%, from a year ago, according to J.D. Power. The average interest rate for a new car loan spiked to 5.5%.
Typically around Labor Day, automakers push new model-year cars and dealers offer more incentives to clear lots of the outgoing model years. Incentives remain low.
On the upside, used car prices remain high and trade-in values offset some of the high costs of new vehicle ownership. Of course, the downside to that is deals on any car are hard to find.