The Average Transaction Price Doesn’t Mean Cars Are Getting More Expensive

If there is one issue I have with the mainstream media covering automotive industry trends it is conflating the average transaction price with the idea that all cars are getting more expensive. That is simply not the case.

This upward curve of transaction prices — before the past year of inflation rise — had very little to do with the base price of all cars going up. When looking at ten years of inflation the price of a Toyota Camry or Nissan Altima is actually less than in the past with way more safety and convenience features. Popular SUVs like the Honda CR-V and Toyota RAV4 did see prices increase with inflation but at modest amounts while larger SUVs and trucks saw prices rise more significantly.

And that last group’s rising popularity — combined with luxury cars seeing prices rise too — is what blew up the average.

We simply have less people buying new Kia Fortes or Toyota Corollas and more people buying Kia Tellurides…well actually through June that Forte to Telluride number was 52K to 47K units or about 10% more Fortes. My point is, more people are buying large Kia SUVs (and other brands) than ever before. And that’s where the average transaction price gets its bump. The starting price of a Forte is $19K to the Telluride’s $33K, or 73% higher. And we know folks aren’t buying base Tellurides.

But shoppers who buy a Forte or Corolla or Sentra or any other affordable model are getting fantastic basic transportation compared to when I started covering autos back in the aughts. They’re safer, smarter, roomier and generally more efficient at nearly the same price when adjusted for inflation.

Now, for a lot of people, spending $20,000 to $25,000 on a new compact sedan is a real sticker shock. I get it. And they do seem like “average” cars. But the average transaction price of $48,000 being reported ad nauseam makes it sound like a $20,000 car does not exist. Or that safe, reliable and affordable transportation doesn’t exist. That is simply not true and could be keeping shoppers on the sidelines.

All that said, there could be more coverage of what recent inflation is doing to MSRPs at the turn of the model year, which is generally right about now. We are seeing those prices rise a few hundred to a few thousand dollars. Even destination prices are rising. Getting an average stat on that number would show how actual car prices are shifting compared to consumer preference shifting, which is really what that average transaction price shows.

I’ve had this argument with former colleagues of mine many times and almost all of them say I’m wrong for thinking like this. That the average transaction price is an important industry metric. I agree. It is a snapshot of the consumer shift in thinking and decision making. It isn’t however a metric on how expensive a new car is for every shopper. ?

David is the director of content marketing at CDK Global, a leading automotive software supplier to OEMs and dealers. He has spent nearly 20 years in the automotive industry as a product evaluator, journalist and marketer for brands like Autoblog, Cars.com, Nissan and Harley Davidson. In that time, David has tested hundreds of vehicles across all types of tracks and terrain. All opinions above are purely his own.