NADA – Recent media coverage about rising new-vehicle prices fails to account for unprecedented market conditions in the retail auto market. The analysis that follows (which is largely based on J.D. Power PIN data drawn from 42% of all consumer transactions for new vehicles) explains key factors driving vehicle pricing.
The widespread microchip shortage has sharply cut vehicle production and reduced dealership inventories to 40-year lows, while consumer demand has remained strong. This supply-and-demand imbalance has created significant upward pressure on new-vehicle prices.
These market forces drove the average price paid by consumers up 13% in 2021. Even with such an increase, the average price paid by consumers during 2021 was still below the Manufacturer’s Suggested Retail Price (MSRP).
Market forces simultaneously drove up used-vehicle prices by 41%, which significantly increased trade-in values. These larger trade-in allowances more than offset the increase in new-vehicle prices. In fact, new-vehicle buyers with a trade-in paid an average of $305 less in 2021 than in 2020.
