New Car Prices Skyrocket [POLL/AUDIO]
"We're looking at record high transaction prices, which is what you actually wind up paying for the car," said Jesse Toprak, senior analyst for TrueCar.com. "Consumers are buying more and more expensive vehicles. They are loading them up with all of the options available and they're able to do so because of very attractive, low interest loans that are available through the manufacturers and banks. There have also been very appealing lease specials available."
Chrysler, Ford, Honda, Nissan and Volkswagen each had record prices during the month of August, while Hyundai was down 4.2 percent from a year earlier.
Trucks are also making a comeback and full-size trucks are more expensive than cars in general, so when looking at the industry as a whole, that brings up prices as well.
"Even when people are downgrading from a larger sedan to a smaller sedan, or from a large SUV to a smaller SUV, they do not want to give up the amenities that they are used to in the larger vehicle," said Toprak. "So, they are buying the smaller vehicle, but they are loading up on the options and getting the more expensive version of the smaller vehicle."
What if interest rates start to go up? How would that affect car sales?
"In the long term, if the interest rates go up dramatically, then it will have a negative impact on car prices, but a quarter percent here and a half percent there will not have a dramatic impact," said Toprak. "Most automakers will still be able to offer zero percent financing even if interest rates go up. There are also very attractive lease specials that now account for about a quarter of all new vehicle sales in the United States because of the very high resale values of these cars. The higher the resale value, the lower the monthly payment on a lease."
Consumer demand has also picked up in recent months and in some situations, there aren't enough cars available. "If you're in the market for a car, don't wait too long," said Toprak. "In the last several years due to the recession, there were plenty of cars on the dealerships lots but that's not the case anymore. So, especially if you're looking for a 2013 model year vehicle and you're picky about the color and options on the vehicle, it's probably better to visit the dealership sooner rather than later because the selections won't be as plentiful."