Americans are paying record prices for new cars and trucks such as this 2014 Ford F-150 STX SuperCrew. The average sale price of a vehicle in the U.S. hit $31,252 last month. Associated Press
DETROIT - Americans are paying record prices for new cars and trucks, and they have only themselves to blame.
The average sale price of a vehicle in the U.S. hit $31,252 last month, up almost $1,000 over the same time last year. The sharp increase has been driven by consumers loading cars up with high-end stereos, navigation systems, leather seats and safety gadgets.
It's a buying pattern that began around two years ago with low interest rates that let buyers choose pricier cars while keeping monthly payments in check. And automakers have also offered cheap lease deals that include fancy options.
Add in booming sales of expensive pickup trucks, and you get record high prices.
But those conditions could soon change. Although sales are expected to keep rising, automakers say the next wave of buyers who replace older cars will be more cost-conscious, shunning expensive radios and cushy seats to reduce payments. Ford is starting to see that trend in pickup trucks, and is adding a lower-priced model to its top-selling F-Series line.
Most car buyers shop based on expectations for a monthly payment, with the average running around $450, said Jesse Toprak, senior analyst with the
TrueCar.com auto pricing website. Since bank interest rates run as low as 2 percent and automakers offer no-interest financing, buyers now have a choice between a lower payment or a nicer car. Unlike rising mortgage rates, shorter-term auto interest rates have remained fairly stable.
"If you can keep your payment the same and get more car, most consumers in the U.S. just get more car," said Toprak, who calculated the record average prices.
The average selling price, he said, went up about $1,400, or 4.5 percent, in the past two years, far faster than normal.
The result is a dream scenario for automakers and car dealers: People are paying record high prices just as demand returns to levels not seen since the Great Recession.
Those who buy instead of lease also get more because low interest rates can bring lower payments. For instance, a loaded-out Ford Fusion with the Titanium package, including heated leather seats, premium audio system and 18-inch polished aluminum wheels, has a sticker price around $31,000.
With zero-percent financing from an automaker's loan company, borrowing $31,000 over five years would cost $516 per month. But if interest rates rise to say 5 percent, the payment jumps to $585. That could cause buyers to cut features to keep the price down.
Original Print Headline: Strong demand pushes auto prices to record high
Transportation
As automakers race to make cheaper electric cars with greater battery range, General Motors is working on one that can go 200 miles per charge at a cost of about $30,000, a top company executive said Monday.
BNSF Railway Co. announced Monday it is spending $125 million to expand and improve its system in Oklahoma. Projects will include a new bypass connection at the Cherokee rail yard in west Tulsa and extending a siding area on the carrier's tracks near Mannford.
