New car prices are on the rise as automakers cut down on incentives and pack new technology features into their models, reports The Detroit Bureau.
From 2008 to 2011, transaction prices have gone up from $25,505 to $28,337 per vehicle, according to J.D. Power and Associates. This past month, prices went up even further. In July, the average transaction price was $30,369 for a new vehicle, up 1.6 percent from July 2011.
The majority of automakers are offering lower incentives this year as demand for new cars increases. Industrywide incentives are down 3.7 percent, averaging just $2,480 in July. Toyota, a major player in automotive sales, lowered incentives by 22.5 percent year-over-year. Only a few automakers, including Honda, Nissan, and Volkswagen, increased incentives.
But the increase in prices hasn’t stopped sales from skyrocketing. Despite the slow U.S. economy, most analysts have revised their 2012 forecasts upward to an estimated 14.5 million sales. This means that 2012 sales will surpass last year’s highly-successful sales of 12.8 million units.
So how can automakers get away with higher prices? Some of the price hikes can be attributed to better equipment made in today’s vehicles. Automakers are ramping up the number of standard features in their vehicles as consumers expect to be connected and entertained in the car. Automakers are also realizing that buyers are holding onto their cars for over ten years, which means they need to derive as much profit as they can from each new car sale. And yet another factor at play: increase prices for steel and rubber have been passed onto consumers buying new cars.
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