The average transaction price for light vehicles down in 2014

Posted on 2/24/14 12:29:00 PM

A chief resource for online car buying recently reported the average transaction price for cars went down more than $1,000 dollars across the nation in January compared to the previous month. Cars.com revealed the sales price of light vehicles - cars, pickup trucks and SUVs - in January 2014 was $29,882, a 3.3 percent decrease and $1,032 drop from December 2013. The transaction price was also down year-over-year in January, with the average sales price dropping $356 from January 2013 to January 2014.

According to WardsAuto, 15.3 million light vehicles were sold in 2013 throughout the U.S. After a robust August, light vehicle sales fell in September, but sales gradually increased month by month through the end of the year.

"After what appeared to be an unstoppable run, transaction prices finally experienced a measurable drop in January," said Jesse Toprak, Cars.com's chief analyst. "The Dow dropped more than 500 points causing buyers to hesitate in purchasing vehicles with higher price tags while vehicles under $30,000 carried the industry sales to an essentially flat performance."

One reason the average transaction price may have dropped is because manufacturers have offered less incentives for buyers, whether it be cash back at the time of purchase or better financing rates.

Cars.com estimated the average incentive dropped $151 for light vehicles in the U.S. year-over-year in January. Incentives were $2,433 in January 2013 and $2,808 in December 2013, but incentives decreased to $2,383 in January 2014, a 15.1 percent fall from the previous month.

"Even though the incentives dropped this month, the current pace of inventory accumulation at the dealerships has the potential to cause heated incentive battles in competitive segments in the coming months," Toprak added.

Cash-strapped homeowners hoping to acquire an automobile should consider a home equity line of credit, which allows them to put their home down as collateral for a loan they can use for an automobile, home improvements or student loan repayments.

Strong fourth quarter for auto retailers
AutoNation, the largest automotive retailer in the nation, recently reported their 2013 fourth quarter revenue results. Like many automobile companies across the U.S., AutoNation garnered a large increase in profits both annually and in the fourth quarter.

In fact, Mike Jackson, the CEO of AutoNation, said his company set a record with its highest annual and quarterly earnings per share in 2013.

"We are looking forward to continued strength in the new vehicle selling environment in 2014, as consumers enjoy an unprecedented array of attractive product options and continued access to affordable credit. We are expecting industry new vehicle sales above 16 million units in 2014." 

Keeping up with the industry
Out of eight of the largest car manufacturers selling vehicles in the U.S. - GM, Ford, Chrysler, Honda, Toyota, Nissan, Hyundai and Volkswagen - only one company, Hyundai, had their average transaction price rise from December to January.

Meanwhile, on a year-over-year basis in January, the three American car manufacturers - GM, Ford and Chrysler - were the only ones to have a drop in their average transaction price. GM's average sales price fell the most at 2.4 percent. Ford dropped 0.5 percent and Chrysler 0.4 percent.

On the opposite end of the spectrum, Volkswagen showed the greatest increase in transaction price year-over-year in January. VW notched a 5.9 percent surge, easily outpacing the next closest, a 2.3 percent increase from Hyundai.

In terms of incentives, half of the eight car giants slashed incentives year-over-year in January, but Honda, Ford, Toyota and Hyundai increased incentives over that span.

Honda, in particular, showed a commitment to strong buyer motivation, increasing their incentives nearly 49 percent from January 2013 to January 2014.