The average price is almost $1,000 higher than in 2018, when Americans paid a slightly more manageable average of $35,742 for new vehicles.
Experts have pointed to a range of factors that could be driving the increase in car prices, one of which is rising interest rates on car lending. As of April 2019, one month before the average pricing data was reported, the average APR on new vehicle loans was approximately 6.4%.
This represents a significant rise from just a few years ago, when average APRs for new cars were typically in the four to five percent range.
However, it’s not just rising interest rates for automotive loans that are driving buyers to spend more on new cars. Another factor that’s driving the increase in average car prices is that most consumers are willing to pay more for larger, more feature-rich vehicles.
Over the last decade, demand for smaller vehicles -- particularly sedans -- has declined. In fact, a recent CNBC article
touched on the “steadily disappearing” American sedan, noting that most consumers today opt for crossovers and SUVs instead of smaller vehicles.
These cars typically contain more advanced features than their smaller counterparts, many of which -- such as navigation -- are now considered standard, essential features rather than the optional extras they were just a few years ago.
With the stock market constantly hovering around record highs, many consumers are simply willing to spend more on a vehicle than they would have five years ago. Automotive industry experts have noted that many consumers now choose higher trim levels and extra features.
Interestingly, there’s also been an increase in demand for used cars alongside the rise in the average new vehicle price. Data published by MarketWatch
earlier this year noted that many consumers are opting for pre-owned vehicles in order to avoid rising car payments.
Many new car purchases are of crossovers and SUVs - models that, while considered niche vehicles a decade ago, now make up a larger percentage of new car sales than sedans and other historically popular vehicle classes.
Florida-based used car dealership HGreg
, which recently expanded into new car sales via the purchase of Nissan Kendall
, exemplifies this change in car buyers’ tastes. A significant amount of the company’s inventory, which numbers in the thousands, are either SUVs or crossovers.
Manufacturers are also adjusting their product lineups to better deal with the changing tastes of car buyers. Last year, Ford announced that it would drop all but two car models from its lineup in the United States
, with the company’s focus switching to SUVs, crossovers and trucks.
For Ford, which sells far more vehicles in the latter segment than the former, it’s a smart move for business. However, it -- and similar decisions by other automakers -- could continue to drive the average price of new vehicles even higher.