The most shocking thing about new cars prices for
2005 is that there's not much shock at all. That's because new vehicle
prices rose by an average of only $465, or just 1.5 percent, over
the 2004 year's models.
"The average MSRP (manufacturer's suggested retail
price) for the 2005 models is $30,946," says Jesse Toprak,
director of pricing and market analysis for Edmunds.com,
a Santa Monica, Calif.-based auto price tracking service.
In 2004 it was $30,481, an average 3.5 percent increase
over the '03s.
Experts attribute the slow down in the rate of price
increase to the entry of new lower-end models like Toyota's Scion
line, the Mazda3, and increased production of its Toyota's hybrid
Prius, which carries a sticker price of about $20,875, as well as
decreased consumer demand that put pressure on automakers to keep
prices down.
Last year automakers sold 16.9 million new cars
and light trucks thanks to a fourth-quarter surge in sales spurred
by very attractive incentives. They finished the year with the
first increase since 2000, but analyst David Leiker projects they
won't be matching that this year. Instead, he sees the industry
topping out at around 16.5 million in 2005.
Automakers "borrowed from the future with programs
that encouraged people to buy earlier than they normally would
have," explained Dan Gorrell, an analyst and vice president
with Strategic Vision in San Diego.
Toprak agrees. "Incentives that were intended
to jump-start the auto market lured people into showrooms last
year, and consumers have been taking them for granted."
Now they won't buy without them, he said. But even
with incentives bringing down the final transaction price by an
average of $2,512, car sales have been sluggish, with new vehicles
sitting on dealer's lots longer.
In industry lingo, the time a vehicle spends on
a dealer's lot is called "days-to-turn." Toprak says,
"On average, the 2005 cars spend 66 days on dealers' lots
before they are sold. That compares to 61 days to turn last year,
and only 55 two years ago."
That's good news for most new car buyers. "As
a rule, the longer a vehicle sits at a dealership, the better
the deal a savvy consumer can get for that vehicle," notes
Phil Reed, author of "Edmunds.com's Strategies for Smart
Car Buyers."
But buyers whose hearts are set on one of the hot new models will
be pay top dollar with no incentives. Among the new vehicles that
dealers just can't seem to get enough of are the Chrysler 300
and the Dodge Magnum, as well as Cadillac's SRX and XLR, Ford's
F-Series trucks and its Explorer SUV, the Dodge Ram, and the Chevy
Silverado.
Other vehicles in strong demand are the venerable
standbys from Japan: The Honda Accord and Civic, and the Toyota
Camry.
"But no matter how you look at it, cars are
more affordable than ever," declares Toprak. As proof, he
points to Detroit-based Comerica Bank's "Auto Affordability
Index."
Compiled from Commerce Department and Federal Serve
Data, the index reveals that the average-priced new vehicle purchased
during the third quarter of 2004 absorbed 20.8 weeks of median
family pretax income, as compared to 21.0 weeks for the comparable
period in 2003.
-- Posted: Feb. 15, 2005
