New car prices surged to a record high last month as buyers paid over sticker price amid an environment of strong demand and tight supply.
The average transaction price for new vehicles sold in the U.S. in October rose 12.9% year over year, or $5,266, to $46,036, according to Kelley Blue Book, an Irvine, California-based vehicle valuation and automotive research company.
Prices were boosted by higher luxury sales and a preference for large SUVs and pickup trucks. Luxury sales rose to 16.3% of the total market, up from 15.2% last year. The average price for a luxury vehicle was $61,020.
The average selling price for all vehicles was 2%, or $800, above the manufacturer’s suggested retail price.
"Whether they are desperate or impatient, consumers continue to pay hundreds of dollars above the suggested price for new vehicles," said Kayla Reynolds, an analyst for Cox Automotive.
"While the average transaction price jumped to a new record high, the average incentive package fell to a 20-year low," she added. "It is absolutely a seller’s market right now."
Record prices may be impeding sales, but supply constraints make it difficult to know for sure.
New vehicle sales rose 4.2% from September to 1.056 million units; however, that was down 22.4% from the same time last year and 21% below October 2019 levels.
Vehicle inventories remain well below normal levels due to the global chip shortage that has developed in the wake of the pandemic.
Automakers including Ford Motor Co. and General Motors Co. halted production at some plants due to the inability to secure chips.
The shortage of new vehicles has steered consumers into the used-vehicle market, resulting in skyrocketing prices.
Used vehicle prices at the wholesale level spiked 9.2% month over month in October, according to the Manheim Used Vehicle Value Index. They were up 38.1% versus last year.
Cars aren't the only goods seeing their prices surge this year.
The October consumer price index released on Wednesday showed prices rose 0.9% in October and were 6.2% above year-ago levels. The annual increase was the biggest in 31 years.