Even with supply chain issues easing and consumers making peace with rampant inflation, the US new and used car market continues tightening. In fact, it’s almost never been harder to buy a car in this country than it is now.
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Vehicle transaction price (the final price a buyer pays after fees, taxes, etc.), climbed higher and faster since 2020 than any other point in 35 years. As a result, the consumer price indexes for both new and used cars (which tracks pricing history over time) outpaced any other time in the country’s modern history.
The average price of a new car has jumped nearly $12,000 in the past five years, according to data from auto website Edmunds.com. For used cars, the average transaction price is still nearly $9,000 higher than it was in February 2018.
“[Prices are] coming down a bit, but not coming down nearly as fast as one would hope,” said Ivan Drury, the director of insights at Edmunds.com. “If you look back, or if you’ve ever done a transaction before in your life, all of these numbers are bad.”
Car prices have largely been affected by truck and SUV popularity
Similar price hikes hit the industry in the 70s and 80s, but the tug hit consumers over the course of two decades. The recent pricing spikes are unique in the fact that they came in just a couple of years. Across the used car market’s worst 12 months of the pandemic, the index rose 45 percent. There’s never been a 12-month period since record keeping began in 1947 when used car prices have inflated more.
Certain regions of the country also face larger spikes in pricing due to increased demand for specific automobiles. In the South, for instance, demand for pickup trucks drove price increases significantly higher than other cars. According to metrics, the average price of a large pickup truck nationwide was $62,430 in 2022, versus around $31,000 for a midsize car — a big reason for the disparity is higher demand for trucks.
Luxury SUVs with lots of after-market options have become fashionable again, as well. More stripped-down models dominated the market several years ago. Changes in consumer tastes drive up prices and also create incentive for automakers to produce more expensive rides. On the used car side, a decline in leasing trade-ins and rental car companies competing with consumers for the same limited supply of three to five-year-old vehicles continues to keep prices high. But, as usual, inflation drives the increases most of all.
“We’ve got a few things that are really hindering the US market,” Drury said. “I don’t see those going away anytime soon.”
