Are Car Buyers Getting Used To Higher Prices?

New Car Buyers Guide

Washington DC May 5, 2012; The AIADA newsletter reported that auto companies and dealers are succeeding in an area where other industries have failed: convincing U.S. consumers to pay more.

In April, the average new light vehicle fetched $30,303, according to research firm TrueCar.com, excluding the average $2,446 incentive dealers put on the hood.

A year ago, the average price was $1,219 lower and the average incentive was $146 higher. Curiously, higher prices don’t appear to be weighing on sales, reports The Wall Street Journal.

An annualized 14.4 million new light vehicles and trucks were sold in April, up 10 percent year-on-year. As for used cars, publicly held dealerships, including AutoNation, Group 1 Automotive, and Penske Automotive Group, have lately reported that first-quarter sales were well above year-earlier levels.

Pent-up demand is one thing working in the car industry’s favor. A virtuous cycle also is developing: Higher used-car prices make new cars more attractive, while smaller incentives will slow the pace of depreciation on new cars, pushing resale values higher.

There also appears to have been some learning following last year’s tsunami-related shortages as dealers are figuring out they don’t need to give as much away to sell cars.

Click here for the full report on consumer behavior in spite of rising vehicle prices.