American consumers are paying more for their new cars and trucks and they are to be blamed for it. The average sale price hit $31,252 last month, which is a record level. It is almost $1,000 over the same period last year. The increase was due to consumers loading cars with high-end stereos, leather seats, navigation systems and safety gadgets.
The trend has been around for two years now as low interest rates allow buyers to opt for more expensive cars while keeping monthly payments within their budgets. Automakers have offered cheap lease deals that included premium options. When the sales of expensive pickup trucks are added, then you’ll get high prices.
The trend could end soon. Sales are still expected to go up but the next wave of car buyers who will replace their older cars will be more cost-conscious and avoid the expensive radios and leather seats to decrease the total costs. Ford said that they observed the trend in pickup trucks and has been offering lower-priced model to its F-Series line.
Majority of car buyers base their purchases on the amount of the monthly payment with the average around $450. Automakers are offering no-interest financing and bank interest rates are as low as 2 percent that allow buyers to choose between a lower payments of a nicer car. Shorter term auto interest rates have remained stable compared to the increasing mortgage rates.
In the past two years, the average price went up around $1,400 or 4.5 percent. This was faster than the normal rate. The result is an ideal scenario for automakers and car dealers because people pay record high prices and demand returns to levels not seen since the recession.
The increase in demand for cars has helped drive up prices. New car sales gained 17 percent last month to 1.5 million, which was their highest level in more than six years. It has been good for car dealerships across the nation.