Biden is wrong about vehicle prices
During a recent CNN town hall, a questioner pressed President Joe Biden about price increases during the economic recovery, including higher prices for cars.
“First of all, the good news is the economy is picking up significantly,” Biden said during the July 21 town hall in Cincinnati. “It’s rational, when you think about it. The cost of an automobile is kind of back to what it was before the pandemic.”
That’s not correct, by any metric we could find.
A shortage in microchips has slowed new-car production, and a decreased supply of new cars has pushed more potential purchasers into the used car market. That, in turn, has prompted prices of used cars to skyrocket. Meanwhile, there’s no immediate end in sight for the microchip shortage, so the higher prices could be with us for a while.
The White House did not respond to an inquiry for this article.
Federal data shows the comparison clearly. Every month, the federal government computes the increase in prices for a wide variety of consumer
goods, including new and used cars.
For new and used cars, prices were stable for years but began to increase in the summer of 2020. By June 2021, prices were up almost 21% over their level right before the pandemic hit.
Most of this increase was driven by prices for used cars. New cars rose by 5.3% over that period, but used cars rose by 43.3%.
This trend is echoed by data compiled by private-sector companies that track auto sales.
Kelley Blue Book found that the average transaction price for a new light vehicle hit a record in June 2021, at $42,258. “In June, for the first time in a decade, vehicle buyers were essentially paying sticker price ... for new vehicles,” said Kayla Reynolds, an industry intelligence analyst at Cox Automotive, which owns Kelley Blue Book.
Edmunds, which tracks automobile prices, found that even well-worn vehicles are flying off sales lots with big premiums. The average transaction price for vehicles with mileage between 100,000 and 110,000 climbed 31% to a record $16,489 in June 2021, compared with $12,626 a year earlier.
And J.D. Power found that wholesale auction prices for used cars, which help determine the prices that consumers face downstream, are 39% above their level in December 2020.
We should note that the chip shortage is not the only factor in the price rise. Consumer preferences for bigger, more tricked-out vehicles have driven price increases for several years.
Americans have been “opting to purchase more expensive and larger vehicles, even during the pandemic,” said Talia James-Armand, an associate director for communications with Edmunds. She shared Edmunds data showing that passenger cars are relatively affordable, whereas SUVs and trucks are doing the most to push up average vehicle prices.
In any case, none of the data shows that prices are headed down to where they were before the pandemic, as Biden said.
Our ruling
Biden said that “the cost of an automobile, it’s kind of back to what it was before the pandemic.”
It’s not back to where it was, or even close. Federal and private-sector data agrees: New and used car prices are on an upward trajectory, smashing records along the way.
We rate the statement False.