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Franchise Dealers Struggle to Turn the Calendar on Model Years

Franchise Dealers Struggle to Turn the Calendar on Model Years Featured

New-car prices reached an all-time high in October, despite incentives also reaching an all-time high as franchise dealers struggle to clear their lots of 2017-model-year vehicles.

The average transaction price of a new vehicle hit a record $35,428 in October, according to the analysts at Edmunds.

This is a 2 percent increase compared to October of 2016 and a 12 percent increase compared to October of 2012.

The average down payment on a new car also reached record territory in October, hitting $3,966. This is up $374 compared to October of 2016 and $454 from five years ago.

"The shift away from passenger cars in favor of trucks and SUVs is impacting all facets of the auto market," said Jessica Caldwell, executive director of industry analysis for Edmunds. "Interest rates are rising and bigger vehicles have higher price tags, but so far car shoppers don't seem to be shying away from putting more money down or having a higher monthly payment to drive the vehicle they want."

At the same time, average incentive spending per unit to date in October was $3,901 per unit, surpassing the previous high for the month of $3,835 set in October 2016.

Manufacturers aren’t just spending to entice people to buy cars, either.

Incentive spending on trucks and SUVs was $3,842, up $73 from last year. While the average incentive on cars was higher, $4,015, it only increased by $69.

Despite the extra spending, many 2017s remain on the lots even as the manufacturers start to roll out the 2018-model-year vehicles.

Edmunds reports that 72 percent of new vehicles sold were 2017 model year, while last October, 60 percent of new vehicles sold were 2016 model year. Five years ago, only 46 percent of the new vehicles sold in October were from the 2012 model year.

"Clearing out old inventory is expensive, especially when automakers are forced to deeply discount passenger cars, which already have thin profit margins," Caldwell said. "With two months left in the year and this much inventory remaining, we expect to see some very creative year-end sales events to entice car shoppers."

 

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