New-Car Shoppers Expect Higher Prices

By Staff Writer May 17, 2021

New research conducted by Kelley Blue Book indicates consumers looking for a new automobile are expecting to be greeted by limited choices and high prices. The research, which involved surveying consumers during the final full week of April, found that three out of four in-market shoppers—those likely to purchase within a year—are familiar with the global microchip shortage and its impact on the new-vehicle market. More than 60% of consumers say they are not planning on delaying their vehicle purchase.  

Kelly Blue Book's Vanessa Ton

“The global shortage of microchips is one of the top stories right now in the automobile business, and if you are a consumer looking for a new vehicle, you don’t have to search hard to see the reports,” said Vanessa Ton, senior industry intelligence manager at Kelley Blue Book, a Cox Automotive company. “Shoppers are expecting high prices and limited choices, and that’s exactly what they are finding.” 

The fact that in-market consumers are acutely aware of market conditions is likely energizing the automobile market. Indeed, last month was a record for April vehicle sales by volume, with 1.52 million vehicles sold. Retail sales in April were particularly strong.

“Consumers are clearly in buy-now mode,” adds Ton, “likely fearing even less choice and higher prices in the months ahead. The new-vehicle market, like the housing market, is very competitive. Heading to Memorial Day weekend and the start of summer, when popular SUVs and pickups are in high demand, it will only get more competitive in the near term.”

Seventy-three percent of consumers are expecting to face higher prices at the dealerships, and nearly 60% believe they will find lower incentives. Four out of ten consumers are willing to pay above the manufacturer’s suggested retail price (MSRP), and those willing to pay over MSRP are willing to accept a 12% premium. In April, according to Kelley Blue Book estimates, the average MSRP for a new vehicle in the U.S. was $41,950. In other words, many consumers are willing to pay $5,000 over sticker price.

At the end of April, new-vehicle inventory on dealership lots across the U.S. was less than 2 million units, down 42% from April 2020.

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Last modified on Friday, 21 May 2021 15:13