Consumer demand continues to drive up average new car price

As they approach a $3 trillion deficit, car shoppers are going for less as selling prices continue to climb. The average new vehicle prices are now $43,035, up $1,106 or 3.7 percent from last…

Consumer demand continues to drive up average new car price

As they approach a $3 trillion deficit, car shoppers are going for less as selling prices continue to climb.

The average new vehicle prices are now $43,035, up $1,106 or 3.7 percent from last year, according to the Commerce Department. That places the new car index on track to the highest level ever. It is well above the $40,334 mark set in 2007, the first year of the Great Recession.

Still, strong consumer demand could limit any spike in vehicle prices in the near term.

“The economy will likely need continued low interest rates to support affordable financing and demand for vehicles will still need to go up at least a little bit to keep things from getting much higher,” Jesse Toprak, chief industry analyst for TrueCar.com, told FOX Business.

The most popular new vehicles in the U.S. are still cars, according to Toprak, who notes that segment sales recently topped 1.7 million for the first time since February.

Customers are opting for vehicle purchases as the inventory shortage continues. Ford Motor Company (F) said earlier this week that 2019 new vehicle sales may fall short of initial expectations, in part due to the supply shortage for some of its top sellers. Chief Financial Officer Bob Shanks told analysts during a presentation that about 20 percent of 2018 sales came from lower-margin discretionary products.

Ford sales fell 1.5 percent last month, partially due to the supply shortage.

The steep decline in new car sales during the Great Recession may not be replicated this time around, with the economy growing and tax cuts contributing to consumer confidence, Toprak said. But with the sharp decline in new-vehicle sales from 2007-2009, the value of those vehicles will never return to 2007 levels.

“You can’t make money on used vehicles that were driven to the max,” he said.

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