New cars are getting more and more expensive. Kelly Blue Book reported earlier this month that the average transaction price of a new car was $35,541, up 1.8 percent compared to the same time last year. This has more consumers checking out the used car lot, causing demand to rise.
“Customers forget a new car is now more than $30,000 and they expect it to be $20,000,” said Brian Allan, a senior director at Galpin Motors Inc., to the Wall Street Journal.
“When people see the price has gone up, it is sticker shock, especially when people only buy a car every five to six years."
Data from Edmunds reports that the gap between the price of a new and used car is now at one "of its largest points in more than a decade". Key reasons for this gap include consumers trending to trucks and SUVs, and automakers adding more expensive tech.
This summer saw a strong demand for used cars and analysts are predicting this trend to continue throughout the rest of the year, partly due to dealers stocking more trucks and utility vehicles. Prices of used cars are also on the rise. Edmunds reports that buyers paid an average of $22,489 for a three-year old used car in the second-quarter - up $865 from the same time last year.
This isn't good news for automakers as new car sales are starting to slow down and pressure could begin building to deepen discounts to lure consumers back. Lenders have been extending the length of loans and introducing 0 percent financing to make buying new more attractive.
Source: Wall Street Journal (Subscription Required)