American families are struggling. Between inflation and ongoing supply issues, life has become really expensive with record-high prices everywhere — including the automotive industry. Now, new cars have hit record-high prices for both non-luxury and luxury cars, beating the record that had previously been set in December. Here's what you need to know.
The pandemic seemed to create a perfect storm that is still impacting the car sale industry, contributing to the rising costs of new vehicles. Demand for cars has remained strong throughout the past few years. However, when paired with the supply chain issues and worker shortage, many factories have been struggling, leading to less inventory. This drove up car prices and is still impacting the market now.
"The chip shortage is still kind of the central piece that's driving supply down for new vehicles," Nick Woolard, senior director of business analytics at TrueCar, an auto pricing and information website, told Fortune last month. "As the supply has gone down, we've seen prices go up for new vehicles, and that trend is continuing."
The combination of strong demand for cars and supply issues has made it so most car dealerships can sell their inventory above the suggested retail price.
According to CNBC, citing a Cox Automotive report, the average transaction price of a new car in June hit a new record of $48,083, up 1.9% from May and up 12.7% from a year ago. Kelley Blue Book (KBB), a trusted resource on cars, says people in the market to buy a non-luxury car paid an average of $1,017 above the sticker price in June. But a large portion of the price increase was from the rise in luxury car sales.
"Luxury vehicles made up 18% of all new car sales in June — a historically high figure," KBB reports. These cars are selling for an average of $1,069 above sticker price. Last year, on average, luxury vehicles sold for $825 below sticker price. But now, some brands are selling for 8.7% above sticker price, KBB shows.
Electric vehicles and hybrids are also more expensive right now. This market saw the most significant increase when looking at month-over-month change, KBB says. The average price of an electric vehicle was up $2,444 in June, and hybrids saw price tags up $3,593.
The reality is that even if you're looking to purchase a used car, which has been far more affordable, there's likely to be some sticker shock there too. At the beginning of the year, the average used car sold for $28,205 — 28% higher than the previous year.
Unfortunately, it looks like these higher sale prices are here to stay. "We are seeing no improvement in inventory levels and continue to see strong demand for vehicles. Continued low supply and high demand will keep prices high," Michelle Krebs, executive analyst at Cox Automotive, told Fortune.
"In addition, when the new model year starts, usually by fall, those vehicles come automatically with higher prices and no discounting — because they are new."