How To Avoid The Highest High Prices On New Cars And Trucks

Downsizing is an obvious way for shoppers to try and avoid the most excessive prices for new cars and trucks, yet the trend to bigger and bigger trucks, SUVs and crossovers still dominates U.S. auto sales.

Consumer demand is still high, despite record-high transaction prices and record-low incentives this year. New potential threats to demand include elevated gas prices, and higher interest rates.

Analysts blame high prices on low supplies of new cars and trucks. Supplies are low because of an ongoing computer chip shortage and other supply-chain problems. In turn, the COVID-19 pandemic is the root cause for a lot of the supply issues.

The net effect is that the average new-vehicle transaction price for June 2022 was $48,043, a staggering increase of $5,410, or 12.7%, vs. June 2021, according to Kelly Blue Book, a unit of Cox Automotive.

The other side of the same coin is that incentives dropped to a record low in June, averaging only 2.3% of the average transaction price, Kelly Blue Book said.

What’s the good news? Keep in mind, those figures are industry averages, said Rebecca Rydzewski, research manager of economic and industry insights for Cox Automotive.

“It’s important to let consumers know there are still vehicles out there,” with lower prices, and-or higher incentives, Rydzewski said in a phone interview.

For example, according to Kelly Blue Book, the average transaction price for compact cars was $26,211 in June. That’s a year-over-year increase of 9.6% vs. a year ago, so percent-wise, it’s still a big increase. Nevertheless, it’s a lot less than $48,000.

Compact SUVs and compact crossovers are a more popular body style and pricier, at an average of $35,021 in June, an increase of 8.4% vs. a year ago, Kelly Blue Book said.

Consumers considering downsizing should also be aware smaller, more affordable vehicles may be hard to find.

That’s because the domestic brands have just about quit making cars at all, especially small cars, and because manufacturers are steering the scarce computer chips they do have, to their most profitable vehicles — larger trucks.

“Trucks are definitely higher-margin vehicles,” Rydzewski said. “And they’re being prioritized by the manufacturers, because of the higher margin they can make off of them.”