KBB is reporting that consumers are paying about $500 less on average for a new vehicle right now, compared with last year. Why? The biggest reason is that Japanese automakers affected by the earthquake and tsunami last year, and who were short of supply as a result, are fully back on line. With greater supply of vehicles usually comes a drop in prices.
The car that has come down the most in price is the popular Toyota Prius. The number-one selling hybrid car is not only dropping in price because of increased supply from its Japanese factory, but because hybrid demand tends to slip when gas prices drop.
Indeed, the top ten vehicles ranked by their biggest drops in transaction prices this year, compared with 2011, are Japanese brands. The cars with the biggest drops in prices after the Prius? Toyota Highlander, down $2,000; Honda Civic is down $1,550; Honda Accord down $1,450; Toyota Corolla down $1,400; Nissan Sentra down $1,250; Mazda3 down $1,200; Mazda6 down $1,050; Nissan maxima down $1,050; Subaru Forester down $700.
"The average Honda model is selling for nearly $1,200 less than this time last year, and a Subaru, Mazda or Toyota is approximately $700 to $800 more affordable," said Alec Gutierrez, senior market analyst of automotive insights for Kelley Blue Book. "Toyota and Honda have regained 4.5 and 2 percentage points of market share respectively through May 2012," Gutierrez added. How have Detroit automakers responded? Their transaction prices have dropped less than $500 per vehicle.
"It used to be that Detroit automakers spent a lot more than Japanese automakers on discounts because Detroit had too many underutilized factories and really had to push out the product," says AOL Autos Editor-in-Chief David Kiley. "Now, we have seen GM, Ford and Chrysler close a bunch of factories and get much more efficient, so they aren't rebating as much as they did five years ago, and their profits are much better for it."