Inflation is now the highest it has been in 40 years and the price of new vehicles is leading the way.
The transaction price for a new vehicle has increased more than 14 percent on average over the last year, according to a report by Kelley Blue Book report.
“New-vehicle average transaction prices (ATPs) increased further into record territory in December 2021 to reach $47,077,” said published Tuesday. The price went up by $5,724 from December 2020.
In spite of high consumer demand, the supply of new cars was limited, forcing dealerships to forgo discounts and, in some cases, to increase prices above the manufacturer’s suggested retail price (MSRP).
As the pandemic-related lockdowns hit the economy, people stayed home, traveled less, and depended more on their computers and mobile devices. Auto manufacturers suspended production owing to lesser demand and complied with government shutdowns to reduce the spread of infection.
Chip manufacturers shifted the focus from automobiles to consumer electronics. Although the easing of restrictions and sudden economic recovery restarted auto factories, they were unable to procure enough chips, leading to halts in production, a shortage in supply, and high prices. Car prices were one of the main contributors to the 40-year increase in inflation plaguing the country.
READ: Biden claims economy is improving
The news continues to plague the Biden administration which saw President Joe Biden’s approval rating drop to a record low of just 33 percent this week. The White House had said in the spring of 2021 that inflation would last just a few months but it has continued to skyrocket since.
Last year saw an overall slump in vehicle sales volumes with six consecutive months of decline that ended in November. However, sales picked up in December with 1,219,034 units sold. The average price for a non-luxury vehicle was $43,072 last month, as customers paid more than MSRP during the last six months.
In December 2018, the percentage of cars compared to other vehicles being sold was 30 percent, while in 2021, it came down to 22.7 percent. Cars costing $42,460 on average were cheaper than SUVs at $46,075, $55,049 trucks, and $46,908 vans.
The average price of a Ford vehicle was $50,698, which is an increase of 5.7 percent from December 2020. Mitsubishi recorded the highest increase of 33 percent at a sticker price of $30,576, followed by $79,182 for Cadillacs at 25 percent.
Meanwhile, Fiat and Porsche went down in price, 8.1 and 6.3 percent respectively, to $27,467 and $98,357. Porsche had the highest average prices among all makes in the report.
The increase is causing some to finance vehicles for 72 months – one of the worst financial decisions an individual can make.
–Trusted wire services