All those cars cost a lot more money today.
Bloomberg/Getty ImagesWe're well into 2021, and last month new car prices hit their sixth record price in a row. In September, the average new car cost $45,031 -- the first time this figure crossed over the $45,000 in history, according to the latest data from Kelley Blue Book and Cox Automotive on Tuesday. That's up from $40,000 at the end of 2020, and up from $42,000 this past June.
From September 2020 to September 2021, new average car prices went up 12.1%, or $4,872. They increased 3.7%, or $1,613, just since August of this year. However, unlike earlier this year when new car buyers flocked to dealers following pandemic lockdowns and stay-at-home orders, there's a different reason for the rising prices this time around.
Auto sales actually dropped 7.3% from August to September, according to the data. This coincides with research showing that many car buyers are giving up on purchasing vehicles as the chip shortage leaves dealers without enough new cars to sell. Earlier this year, high demand and low inventories fueled automaker profits. While new cars are still less available, KBB's latest data shows that luxury car, pickup and midsize SUV buyers are driving the average price increase in September.
The sales that did happen involved fewer entry-level cars, hatchbacks and other affordable vehicles, but included more luxury cars, whose sales increased 15.1% compared to September 2020. Premium cars made up a larger chunk of all new vehicles purchased last month: 16.6% of total sales. In fact, the share of luxury cars was the highest it's been in the past 10 years, KBB found. And the average luxury car cost buyers $60,845, which definitely increases the overall average new car price.
Contributing to the higher prices for new car buyers is the lack of incentives from automakers. Usually, cash companies will knock off the price to make a deal. In today's market, with such small inventories, there's no need to coax buyers in the door with cash-back deals and the like. The latest data showed incentive spending fell to a record low of just 5.2% of a car's average transaction price. One year ago, automakers would spend 10% on average to help sell a car.
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