Average new car price over $40K for first time
The average price of a new vehicle topped $40,000 for the first time ever as Americans switch from passenger cars to costlier SUVs and pickups.
With prices rising, the average down payment on new cars, trucks and SUVs reached an all-time high in the fourth quarter, according to analysts at car-research site Edmunds.
The average amount borrowed to finance a new vehicle was close to an all-time high.
The bottom line is that Americans with the financial wherewithal to buy a new vehicle are still enthusiastic about it despite the ongoing pandemic.
“People that are in the new car market are somewhat insulated from the downturn experienced by the pandemic,” said Jessica Caldwell, executive director of insights at Edmunds. “It’s almost like we have two different countries ... of people who are buying new houses, buying new cars, versus other folks who are perhaps in the service industry and are struggling.”
In the fourth quarter, the average price of a new vehicle was $40,179, according to Edmunds. In December, it was $40,573. Both are records.
The average new-vehicle buyer borrowed $35,373 and placed a down payment of $4,734 in the fourth quarter of 2020, up 5.5% and 9.4%, respectively, from the fourth quarter of 2019.
“A lot of it just has to do with cheap money,” said Andrew Gilleland, general manager of Toyota’s Lexus brand. “You can go out and get a pretty reasonable interest rate, but also customers are looking for more equipment on their cars.”
Essentially all of the major automakers have added SUVs in recent years, including major entries from Toyota, General Motors, Ford, Hyundai, Subaru, Kia and Volkswagen.
The trend has changed the complexion of automakers once known for their passenger cars. Cars like the Chevrolet Cruze, Ford Focus, Honda Fit and Volkswagen Beetle have been discontinued, while SUVs like the Chevrolet Blazer, Ford Bronco, Honda Passport and Volkswagen Atlas have been created from scratch.
Scott Keogh, CEO of VW U.S., noted that large SUVs like the Atlas have much higher profit margins than small cars like the Beetle.