Rising interest rates and fears of a recession have cast a dark cloud over the automobile industry, forcing car companies to consider their options to keep new cars moving off the lot.
The good news for the auto industry is that new vehicle inventory levels have been improving, Kelley Blue Book said in a Dec. 12 statement, but the bad news for car buyers is that the average transaction price for a new vehicle in November hit a new record high of $48,681. Prices in November rose 0.9% or $422 month over month from October and were 4.4% or $2,250 higher year over year.
Average transaction prices have also been higher than the average manufacturer's suggested retail price since July 2021, and sales volumes in November were 11% higher year over year but were down from October.
Adding to the higher transaction price, the average interest rate on a 60-month new car loan in November 2022 was 6.05% compared to 3.88% a year earlier in November 2021, according to market and consumer data provider Statista.
Solid luxury vehicle sales have been the top reason for overall elevated new-vehicle prices. The luxury vehicle share of the market remains historically high, increasing to 18.2% of total sales in November from 17.8% in October. The high share of luxury sales helps to push the overall industry average transaction price higher. In November 2019, the luxury vehicle share of the U.S. market was 16.1%.
Luxury Cars Hit a Record High Price in November
The average luxury car buyer paid $67,050 for a new vehicle in November, which was a record high and $405 higher than October. The average price for a new electric vehicle in November was $65,041, which was $1,171 or 2% higher than October and 9% higher year over year, Kelley Blue Book said.
The elevated prices and high loan rates are likely putting downward pressure on sales, Kelley Blue Book said. The significant interest rate hike, combined with rising prices of new vehicles is a recipe for disaster for the auto industry as the public grapples with worries of a possible recession on the horizon.
Certain luxury EV manufacturers are aware of the market challenges and have started to adjust their sales programs to try to avert a downturn in business. General Motors (GM) - Get Free Report luxury EV brand 2024 Cadillac Lyriq and Lucid's (LCID) - Get Free Report Air Grand Touring EV have essentially lowered their prices in an effort to generate sales at the end of the year and beginning of 2023, as their business gets more challenging in the months ahead.
Cadillac Lyriq and Lucid Air Grand Touring Have Big Savings
Cadillac Lyriq's website shows its 2024 Lyriq rear-wheel drive models at a preorder price of around $60,000 for delivery in spring 2023. That's almost a $3,000 savings off the $62,990 base price of the 2023 Lyriq model that is listed as sold out, InsideEVs reports.
Lucid Motors is trying to ramp up deliveries on its Air Grand Touring model by reducing the price by about $16,000 to $138,000 from $154,000, InsideEV said. The reduction is made possible by removing several features on the vehicle that were previously standard equipment. Air Grand Touring's DreamDrive Pro ADAS suite, valued at $10,000, Surreal Sound Pro, at $4,000, and 21-inch Aero Blade wheels, at $2,000, are now optional features.