Buyers Spending More Money On New Cars Than Ever Before

Sales

The new average transaction price of a car? $32,169.

As we kiss the first month of 2018 goodbye, J.D. Power and LMC Automotive have just issued a report predicting how the auto industry will shape up in 2018. Gauging from a bad start this January as well as industry forecasts, the picture will not look as pretty as it did in the boom year of 2016. Sales are estimated to dip 1.5% this year, an echo of January retail sales that saw a dip of 2.7%. It’s worth noting that Januarys can be tough for automakers.

It's during this time that they struggle to unload old models that consumers may not want and that can be seen in the numbers. Not like automakers will be hurting for cash, though. That’s because the average vehicle sale price rose in January to a new high of $32,169. Even with overall sales going down, an uptick in average sales price is sure to help automaker's bottom lines. On the other hand, profits could be burned up if automakers offer too many incentives. “The challenge in 2018 will be maintaining incentive discipline, coming off a year when incentive spending per unit reached the highest level ever recorded,” said Thomas King, Senior Vice President of the Data and Analytics Division at J.D. Power.

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That doesn't mean that uncertainty isn't strong either. J.D. Power and LMC Automotive are also taking into account other variables including the expected economic boom in 2018 that should free up more cash for consumers to spend on cars as well as the uncertainty of the United States' commitment to NAFTA, which could hurt sales. Another trend that should continue is the higher take rate of SUVs that simultaneously eats into sedan sales. The SUV segment is expected to grow to take up a 45% market share in 2018 while sedans will drop to a new low of 33%. It seems that for now, automakers have managed to avoid another crisis, especially considering the looming subprime auto loan problem.

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