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At a time when you hear so much about how auto manufacturers --
especially the domestic variety -- are hurting
for sales and profits, you might assume that prices
would be heading downward.
After all, it's a pretty basic idea in retail sales
that to sell more product you cut prices. But the truth in the automotive market
is that list prices for 2007 models have actually gone up this summer, compared
to 2006 sticker prices. An analysis by Crain's Automotive News
shows the average sticker price of a 2007 new car or light truck -- the category
that includes pickups, minivans and SUVs -- has gone up $372. For the 2006 model
year average sticker prices went down $138 from 2005, meaning this year the automakers
have recouped those cuts and more. Of course no one who has
done their homework pays sticker price, so how relevant are sticker price increases? Well,
according to the latest industry figures, the transactional price -- what buyers
actually pay -- rose $760 in May to $27,158, compared with a year earlier. And
what about all those rebates we see advertised? On average, they're shrinking,
too. Average rebates were $2,121 in May, compared to $2,277 in May 2006 and $2,626
in May 2005, according to the Power Information Network. What
should you, the consumer, take from all this number crunching? Amid
all the bad news in the headlines, there has surfaced some sentiment among buyers
that it's only a matter of time until there will be fire-sale price cuts and rebates
across the board in the auto industry. Don't count on it. The
car or truck you buy today will cost more than the last one you bought, even if
that was in 2006. And the 2008 models and beyond will cost even more. The increases
are slight, and almost negligible when buried in a monthly payment, but don't
think for a second that we're going to see any deflation on auto prices. There
may be momentary small dips, as seen in 2006, but each year more content is added
to base vehicles -- like tire pressure sensors for safety and higher-fidelity
audio systems for luxury -- and manufacturers are going to pass those costs along.
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