With dwindling selections and fewer dealer incentives, consumers spent more to purchase a new car in May. Kelley Blue Book (KBB) estimates that the average transaction price (ATP) for a new car or light truck was $41,263, a $2,125 increase over May 2020.
It was also nearly $500 more than consumers paid for a new car or truck in April. Consumers purchased more trucks and cars with higher trim levels, helping to boost the ATP.
"Last month's average transaction price-performance highlights an all-time high in year-over-year growth for the month of May," said Kayla Reynolds, industry intelligence analyst at Cox Automotive. "Many manufacturers reported year-over-year gains in average transaction prices. The largest increase came from Mitsubishi, up 12% from this time last year."
Mitsubishi is known as one of the more affordable automotive brands, offering a line of compact sedans that are easy on the wallet. In May, consumers purchased more Outlander and Outlander PHEV vehicles, which are Mitsubishi's highest-priced vehicles.
Non-luxury vehicles got more expensive
The rise in automotive spending was not limited to luxury cars. KBB notes that non-luxury cars saw bigger price gains than luxury models.
Standard full-size SUVs and pickup trucks also contributed to the growth among non-luxury segments. The third and fourth highest-priced models within the segment include the GMC Yukon and Yukon XL, which carry an average ATP of $77,031 and $79,695, respectively. Both of those prices are substantially above the industry and segment average.
At the same time, consumers paid less for electric vehicles (EV) than they did a year ago. The ATP for EVs fell 10.8% from 12 months earlier but was slightly higher than April’s average cost. The minivan segment saw the largest overall price gain last month. Its ATP increased by nearly $6,000 over May 2020, and was 2.3% higher than in April 2021.
Fewer sales, higher profits
The vehicle shortage is working in car dealers’ favor. Cox Automotive reports dealer profits will likely end the second quarter at record highs.
“The price pressure index in Q2 dropped to a record low, meaning a majority of dealers are feeling little pressure to lower prices,” the company said in its latest update. “Inventory, on the other hand, continues to be a major concern.”
Cox Automotive Chief Economist Jonathon Smoke says many of May’s automotive sales trends have carried over into this month. He says June’s sales activity appears to be at pre-pandemic levels.