Higher interest rates have hit as automakers double down on pricier models, as the average price for a new car hit $48,008 in March.
A big reason auto manufacturers have leaned heavily into pricier vehicles is the global chip shortage. The dearth of the tiny electronic components, caused by pandemic-related gyrations in supply and demand, forced automakers to slash output, sending prices for new and used vehicles up. The scarcity forced carmakers to ration their components, which they did by reserving them for their most profitable, high-end vehicles.
In Austin, Johnny Loredo and his wife paid $38,000 for a new Nissan Frontier truck two years ago. “I was in sticker shock … and it was a base model,” he said. If they hadn’t had a used Suburban to trade in, they wouldn’t have been able to afford it, he said. Manufacturers determine which cars get sent to dealerships, and typically won’t send new inventory until the current stock gets sold. In Maryland, where Andrea White has expensive cars sitting on her lot, she said she’s “just suffering through it.”“We have some final edition Dodge Challengers for $80 or $90K,” White said. “We don’t even want another one.
The mismatch also stems from automakers’ response to how consumers behaved at the height of the pandemic, when many Americans had more cash to spend on goods and were ordering new vehicles with lots of extra features.“These big Suburbans and Yukons and Expeditions, they were loaded up. So when you look at some of these numbers, some of this was self-inflicted by the consumer,” Pete DeLongchamps, senior vice president at Group 1 Automotive, which owns 150 auto dealerships in the U.S.
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