Why You're Paying More For Your New Car This Year
Automakers are drastically dialing back cash incentives
With an economy that continues to limp toward recovery, and sharply increased consumer demand for new vehicles, auto companies have started scaling back their cash incentives in favor of better deals on financing and leasing.
What does this mean for buyers? August is always a brisk time to buy a car, SUV or truck, as automakers run sales to try and clear out the last of their 2012 model-year inventory. But the reality is that the deals aren't as good as they were a year ago.
According to TrueCar.com, some automakers-- notably Volkswagen, Honda and Nissan -- are, in fact, offering bigger incentives right now than they did in 2011. But, overall, the industry decreased incentive spending by 3.7%, which, of course, translates to higher final selling prices to consumers.
Why can most automakers afford to cut back on cash-back offers? Because so many buyers delayed their purchases between 2009 and 2011 after the great financial meltdown of 2008 and 2009 and so many jobs were lost, they have been coming back as their finances have stabilized and their cars have gotten older. The average age of cars and trucks on the road today is over ten years.
At the same time, when General Motors and Chrysler were going through bankruptcies in 2009, they closed some of their production lines. Ford did as well. So, while demand is up, the suply of vehicles is lower than it was. Without gluts of cars to sell, Detroit automakers especially don't have to offer rebates as big as they used to move the metal.
A shortage of supply has helped Korean automakers Hyundai and Kia as well. Those companies vehicles are in big demand and they are having trouble building some of the popular vehicles fast enough. That's a nice problem to have.
So, what are the numbers? TrueCar says the average rebate in July was $2,480. Meantime, the average price for a new vehicle was $30,369 last month. J.D. Power puts the average price of a new vehicle last year at $28,337. The higher price is due to not only smaller rebates, but also a surge in luxury car sales and people opting for pricier packages like those that connect your smart-phone to your car.
"Just because the prices are rising and the rebates are falling doesn't mean there aren't bargains to be had," says AOL Autos editor-in-chief David Kiley. "For one thing, consumers will be surprised if they really start looking that vehicles and brands they might not have considered before are fantastic deals compared with the vehicle they might have been focused on."
Examples? Kiley says if you were focused on a a mid-sized sedan such as a Toyota Camry or Ford Fusion, and the transaction prices are higher than you thought, you would do well to look at a Hyundai Elantra sedan, which is a few thousand less with hardly any real-world sacrifice on room. AOL Autos picked the 2012 Elantra as "Best Car Under $20,000."
But while the numbers don't seem to be in your favor right now for finding a bargain, we can help. Check out our innovative new car shopping tools to ensure that you're getting the best deal on the car of your dreams. Click the link below to get started!
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