Report: People Willing to Pay Stupid Prices for New Cars
While we’d like to get away from stories about everything becoming more expensive, everything actually is becoming more expensive and it looks like a healthy slice of the population is allegedly willing to go along with it. According to the latest data coming from Cox Automotive, roughly 40 percent of the U.S. population would purchase a vehicle at 12 percent above sticker. There’s always been a subset of shoppers who don’t know when they’re being taken but this represents a healthy share of the country.
It makes one wonder where these surveys were being conducted until Cox summarized the situation as the direct result of a populace beaten down by their environment. Apparently, people no longer expect to find good deals and have not yet reached the point where they’ll feel comfortable driving around in the same busted crate that’s seen them through the last decade as a way to save money.
“The global shortage of microchips is one of the top stories right now in the automobile business, and if you are a consumer looking for a new vehicle, you don’t have to search hard to see the reports,” notes Vanessa Ton, senior industry intelligence manager at Kelley Blue Book (KBB), a Cox Automotive company. “Shoppers are expecting high prices and limited choices, and that’s exactly what they are finding.”
In dollars, that 12-percent increase amounts to roughly $4,900 — as the price of the average new car now exceeded $40,000 at the start of this year. And almost half the population is willing to pay it, according to the survey. But KBB suggested the prices are probably a bit higher than that, citing its own elevated pricing metrics over the last couple of months:
The Kelley Blue Book research shows that 87 [percent] of consumers recognize the issue is impacting both domestic and import nameplates. As the issue is industry-wide, 73 [percent] of consumers are expecting to face higher prices at the dealerships, and nearly 60 [percent] believe they will find lower incentives. Four out of ten consumers are willing to pay above the manufacturer’s suggested retail price (MSRP), and those willing to pay over MSRP are willing to accept a 12 [percent] premium. In April, according to Kelley Blue Book estimates, the average MSRP for a new vehicle in the U.S. was $41,950. In other words, many consumers are willing to pay $5,000 over sticker price.
Awareness of what has become a “seller’s market” has steered some consumers to the sidelines. The research shows that 37 [percent] of in-market consumers are now planning to postpone their purchase. Of those consumers deciding to delay, 70 [percent] will step back for three months or more. Only 23 [percent] of new-vehicle intenders are willing to switch their purchase intention to a used vehicle. Fewer are willing to shift segments.
That’s a shame because yours truly was hoping to see an influx of economy-focused compacts that eventually made way for high-strung and performance-focused siblings. Instead, it looks like we’ll just have people blowing over 40 grand on crossover vehicles.
Though the 37 percent of people that Cox claims are getting out of the market (at least temporarily) could make the assumed price tolerances short-lived. Some people (likely yourself) are simply unwilling to live with the shame associated with paying way over sticker and, if supply issues are solved and production schedules normalize, the industry could find itself with a totally new set of problems. Though we don’t foresee anything like that happening until the end of 2021, if not substantially later.
[Image: Gretchen Gunda Enger/Shutterstock]
Consumer advocate tracking industry trends, regulation, and the bitter-sweet nature of modern automotive tech. Research focused and gut driven.
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