By on December 16, 2016

2016 Ford F-150 Limited

All that leg-stretching, snot-nosed kid-hauling, hockey equipment-carrying, ATV-lugging space that new vehicle buyers so desperately crave comes at a premium.

Thanks to this insatiable thirst for crossovers, SUVs, and pickups, the average new vehicle transaction price jumped to a new record in 2016. Good news for manufacturers, but also for those selling their old ride.

According to Edmunds, the average transaction price for a new vehicle hit $34,077 this year. That’s a 2.7-percent rise over last year’s average. In the past five years, the amount shelled out by an average buyer rose 12.6 percent, a boost fueled by the rapid shift towards pricier utility vehicles.

Compare that figure with the country’s 2016 inflation rate of 1.7 percent.

The market’s abandonment of traditional passenger cars, coupled with the popularity of leasing, means we’ll likely see the trend continue. Edmunds predicts transaction prices to average $35,000 in 2017. Leasing, which currently represents 31 percent of new vehicle transactions, should grow in the new year.

The days of sensible sedans and station wagons ruling America’s roads are over. No longer does a higher-trim version of your existing sedan — LTD, anyone? — or personal luxury coupe represent the aspirations of most car buyers. This year, light trucks gobbled up 62 percent of the market.

While building vehicles capable of hauling five people and a lot of cargo has proved a gold mine for automakers (well, except Fiat), the rise of utility vehicle dominance hasn’t just affected new vehicle prices. In many cases, it has made the hunt for used vehicles more difficult.

“The flip side of this trend is that higher prices are putting a bit of a squeeze on the market for lower-cost, used vehicles,” said Jessica Caldwell, Edmunds executive director of industry analysis. “Our data shows that more people are looking for affordable older vehicles than are actually sold, driving up values and demand.”

Of course, buyers can avoid this by seeking out unpopular models that won’t move off the pre-owned lot.

[Image: Ford Motor Company]

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20 Comments on “Your Love for Trucks Has Average Transaction Prices Beating Inflation...”

  • avatar

    Really curious to see what comes after trucks. I’m guessing the autonomatons.

  • avatar
    SCE to AUX

    “In the past five years, the amount shelled out by an average buyer rose 12.6 percent”

    In other words, average transaction price has risen 2.4% annually.

    The CPI from 2011 to 2016 has risen by 7.3%, or 1.4% annually.

    Supply and demand are certainly driving this trend, but it may stall or reverse as we’re now near Peak Truck and Peak Market, and mfrs incentivize their way to stardom.

    • 0 avatar
      Big Al from Oz

      SCE to AUX,
      As I wrote below cheap money and cheap fuel has had the biggest impact on transaction prices.

      I do think “how much can I blow a month” drives the price of the larger investments we make ie, homes and cars.

      I would think the rise of interest rates will have some auto manufacturers concerned. Then add the major oil producers winding back production.

      People will drive what they can afford to buy and maintain. Is the future going to include more smaller vehicles again?

  • avatar

    It’s also CAFE that’s pushing up prices.

    Manufacturers are having to lose money on the vehicles people don’t want to buy in order to move them so they can build full size trucks and SUVs that are profitable and that people want to buy.

    What’s funny to me is supporters of CAFE want to deny this phenomenon when that’s EXACTLY what the program is supposed to do. FORCE manufacturers to build vehicles they normally would not want to build.

    • 0 avatar

      When you spend more, you get more back. At least in theory. It was true for TDIs, but that’s a different story.

      When it comes to pickups, it really does pay to step up to a crew cab with 4wd, mid trim or higher. With max rebates/incentives of course.

    • 0 avatar

      You’re forgetting the other side of the equation. It also forces the car makers to act as a cartel that pretends big engines are rare and expensive. Go look up how much the head offices hated muscle cars. CAFE let them get rid of them and make big engines a major profit source and force you to buy fancy labels to get them.

      But yeah. CAFE is the reasons that Trucks took off. Can’t get that power without a body that “deserves” it. Don’t forget safety issues as well, remember that minivans during their hayday were never required to be as safe (and of course Detroit *CAN’T* do anything unless forced) than the family cars they were replacing.

      • 0 avatar
        Big Al from Oz

        I don’t think CAFE has influenced pickups other than promoting fullsize pickup numbers vs midsize. Midsize numbers have improved mainly on “highly” refined and nearly as capable pickups for the 75%ers who would of bought a full size only a few years ago.

        Cheap money and cheap fuel has had the most significant influence. This can be proven by the even larger improvement of pickups globally. Even in the US pickups are still not as popular as they once were.

        • 0 avatar

          CAFE initially favoured the push to larger vehicles. 1/2 ton pickups became “heavy half” to keep ahead of the CAFE GVW cut off. Same can be said for large SUV’s. Tax laws in the USA also favoured larger GVW vehicles.
          All of the small truck makers have abandoned regular cab trucks. This is partially due to footprint but also due to the fact that reg cab small trucks are the domain of fleets and cheapskates.

          CAFE is no longer driving the small versus large truck mix. We are seeing an upswing in small truck sales despite low fuel prices. There isn’t much of a gap in MPG between a 1/2 ton crew and a small truck. I’ve been along side a few Colorado’s at traffic lights and other than length, they aren’t much smaller than my F150.

          • 0 avatar
            Big Al from Oz

            DenverMike/papajim aka Lou BC,
            There is a signicant difference in footprint between a fullsize 1/2 ton and a midsize. That sort of negates your argument.

            The upswing in midsizers is due mainly to capability and refinement improvements not CAFE. The new midsize pickups will more or less achieve what a 1/2 ton was only capable of a short time ago. This is what makes them attractive.

            This suits the 75% who drive pickups as daily drivers, the ” because I can owners” or “wannabe big rig truckies” clan.

            The other argument regarding the 8500lb GVM has little impact. Most who buy a pickup will not want to drive a vehicle a generation or two behind current half ton pickups with the size and mass coupled with the lack of comfort.

          • 0 avatar

            @BAFO – It comes down to *choice* is all. Midsize pickups don’t offer much, if any mpg advantage and are priced about the same as fullsize, or a bit more after fullsize rebates/incentives.

            It’s like when the “ANY SIZE SOFT DRINK” is just $1. Why would anyone opt for a Regular size?? Perhaps their cup holder won’t take a Large.

            Those less concerned with payload/towing may want the ease of parking that “midsize” offers. They’re the choice of “lifestyle” pickup buyers for a reason. Most of the amenities/luxury/gadgetry of fullsize, minus a little girth.

            But CAFE is flawed when it comes to midsize pickups and “footprints”. CAFE should ease up on them. Midsize pickups have the same exact problem with aerodynamic resistance or “drag” as fullsize. That’s compounded by midsize pickups that are under-powered for their weight (empty). A smallish V8 would be perfect! Instead, your foot has to be deep in the carpet, just to keep up with traffic.

          • 0 avatar

            BAFO ???????????

            Looks like you have been smokin’ some bad kangaroo sh!t once again.

      • 0 avatar

        I was going to say, with average txn prices up and SUV/CUV/Truck sales up as well, shouldn’t their margins be some of the highest ever, as well?

        Instead of selling luxury to sedan buyers as upsell, they’re selling way bigger engines/4×4/whatever than most people need or use.

    • 0 avatar

      CAFE doesn’t work that way anymore, the compact car has to get better MPG than the full size truck and as long as each vehicle meets their target it doesn’t matter what the model mix is.

    • 0 avatar

      Repeal it all.

    • 0 avatar
      Big Al from Oz

      If people don’t want to buy a particular vehicle they will not. Prioriries comes first (to most sane people) ie, roof over your head, food, electricity, etc.

      Purchases comes down to requirement first with “X” dollar affordability. Then once that’s resolved the wants are factored in.

      Most people could get away with a Honda Jazz. After that its not a necessity, its lifestyle choice on how and what lifestyle you choose.

      The wants is were some come unstuck. They buy a “want” vehicle that stretches their budget.

      • 0 avatar

        “If people don’t want to buy a particular vehicle they will not. ”

        But manufacturers then have to incentivize it to the point that they do want it, so one line is subsidizing the other.

        They can’t simply “stop” making small cars that are difficult to sell or not profitable because they will then not be in compliance and can’t sell the rest of their line up.

        Again, this all by design, yet some people want to say it has nothing to with it.

        Even General Motors former CEO has said this is exactly why Truck and SUV prices are going through the roof far past the rate of inflation.

  • avatar
    Big Al from Oz

    First, I definitely don’t view many of the vehicles sold as light trucks. These are the car based CUVs and some SUVs. The US definition of a truck has been bastardised to facilitate large vehicle manufacturing/protection.

    The “light truck” has different FE requirements.

    So, this leaves pickups (generally) with pickup based SUVs.

    Leasing also distorts transaction prices as well. Low interest rates have an affect on transaction prices. Look at share prices on Wall St, cheap interest rates have reduced the cost of investing/spending.

    The trend towards CUVs and SUVs has been global. Even pickups are selling well outside of the US.

    Low interest rates has made it easier for this to occur. When interest rates rise, with an upswing in fuel prices we will witness another change. It ain’t going to be expensive EV or hybrid vehicles either.

  • avatar

    If you accept the idea that prices are largely based on the actual value that purchase represents then it’s not surprising that transaction prices are increasing.

    Late-model vehicles offer more power, comfort, reliability, entertainment, efficiency, and safety than their contemporaries from even 5 years ago. Of course people are willing to pay more for them.

  • avatar
    Jeff S

    Eventually the sales of full size pickups and suvs will peak and go down. There is a limit to how long cheap or no interest loans will be around with the Federal Reserve raising rates. There is also a limit to how long cheaper energy prices will exist even with more reserves of oil being found. Below a certain price it does not pay to produce oil and with OPEC and other producers restricting production there will be a limit to how much oil will be available. Another major conflict in the Middle East or a pipeline rupture can cause an interruption in supply and an increase in price. An economic downturn which will eventually happen will cause lower demand for full size trucks and suvs. Economies go up and down and then go up and down again. Nothing lasts forever. Also things go in cycles and what is popular now will not necessarily be popular in 10 years. Large sedans and station wagons were popular in the 70’s, then smaller cars and mini-vans, and now pickups, crossovers, and suvs. Even though pickups and large suvs are selling well they are not selling at the same rate they were sell at pre-2008. Everything goes in cycles.

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