Vehicle prices at record as U.S. consumers opt for luxuries

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DETROIT — Americans are paying record prices for new cars and trucks, and they have only themselves to blame.

The average vehicle sale price in the U.S. hit $31,252 last month, up almost $1,000 over August 2012, as consumers load cars up with high-end stereos, navigation systems, leather seats and safety gadgets.

The buying pattern began around two years ago as low interest rates let buyers choose pricier cars while keeping monthly payments in check. And automakers have offered cheap lease deals that include fancy options.

Add in booming sales of expensive pickup trucks, and you get record high prices.

But those conditions could soon change. Although sales are expected to keep rising, automakers say the next wave of buyers will be those frugal people who kept their cars through the recession and now need to replace them, shunning luxuries to reduce payments. Ford is responding by adding a lower-priced model to its top-selling F-Series pickup line.

Monthly payments

Most car buyers shop based on expectations for a monthly payment, with the average running around $450, said Jesse Toprak, senior analyst with the TrueCar.com auto pricing website. Since bank interest rates run as low as 2 percent and automakers offer no-interest financing, buyers now have a choice between a lower payment or a nicer car. Unlike rising mortgage rates, shorter-term auto interest rates have remained fairly stable.

"If you can keep your payment the same and get more car, most consumers in the U.S. just get more car," said Toprak, who calculated the record average price.

The average price, he said, went up about $1,400, or 4.5 percent, in the past two years, far faster than normal.

The result is a dream scenario for automakers and car dealers: People are paying record high prices just as demand returns to levels not seen since the Great Recession.

It's also a dream for people like Zachary Bier, a 26-year-old engineer and sales representative in New York City who just leased a $52,000 BMW 335i to replace a 3-Series with an expiring lease. He set out to match his old $650-per-month payment with hopes of getting more features.

For the same payment, he got metallic black paint, upgraded leather seats with red trim and stitching, Bluetooth technology to link his phone to the car, a heads-up display that projects his navigation system and other data onto the windshield, and electronic blind-spot detectors, he said.

"I guess I was surprised based on the sticker price that this car has so much more," he said. "For everything that comes on this, I feel like it's a better car."

Moderation seen

Many in the business think prices will moderate some because people who kept their cars through the recession and now need to replace them won't load up on options.

"They tend to be more price-sensitive," General Motors Co. Chief Economist Mustafa Mohatarem said.

The message isn't lost on GM's crosstown rival, Ford Motor Co., which has seen budget-minded buyers shopping for F-150 pickups.

Eric Peterson, marketing manager for the trucks, said wealthier buyers were first to return to the market after the recession, buying expensive versions like the $47,000 Platinum, which comes with heated leather seats, navigation, a premium audio system and other goodies.

Now, Peterson says, contractors and small-business owners are hiring workers who also are looking for pickups. But they want something more reasonably priced to haul gear and families.

Ford will try to please them this fall by adding a four-door cab to its lower-cost F-150 STX line. Previously, the STX only came with a two-door cab. The STX has features not available on a base model, such as power windows, keyless entry and cruise control. It's also more stylish, with machined aluminum wheels instead of steel ones. But it doesn't have some of the more expensive options like a backup camera or a leather steering wheel.

With a starting price of $34,240 — around $1,500 more than the base model — the new version sits in the fastest-growing part of the pickup market, Peterson says. Forty-six percent of full-size truck buyers spent $30,000 to $40,000 on a truck in July, up from 42 percent at the beginning of this year.