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Incentives Shrinking, Bringing Vehicle Prices To Record Levels

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2012 Ford Focus

2012 Ford Focus

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2012 Honda Civic Hybrid

2012 Honda Civic Hybrid

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Remember all the incentives being thrown down on new vehicles a year or two ago? They're pretty much gone, and the transaction prices being paid for new vehicles are now at record levels.

According to the pricing-intelligence firm TrueCar, the average transaction price for a new vehicle is up to $29,817. That's 2.1 percent higher than a year ago, industry-wide, and 0.7 percent higher than just a year ago.

Even though shoppers are choosing smaller, more fuel-efficient vehicles, typically with lower base prices, they're choosing loaded versions of those vehicles, observes TrueCar. "Even though consumers continued to move toward smaller vehicles, they also chose highly contented vehicles that are higher priced, keeping transaction prices high," said the company's VP of trends and insights.

Ford, Honda, and Nissan models have had the largest price hikes, purely when looking at final transaction prices, compared to last year. Ford vehicles priced 5.2-percent higher overall in May, compared to last May, while Honda and Nissan were 4.6-percent and 3.5-percent higher, respectively.

Those numbers are likely bolstered due to the introduction of several all-new mainstream models: Since last year, Ford has introduced a new line of 2012 Focus small cars, along with an all-new 2011 Ford Explorer mid-size crossover; Honda is also rolling out a refreshed 2012 Civic model line.

And though automakers have been limiting price hikes, typically, it's the lack of incentives that's bringing the pricing bottom line back up. Automaker incentive spending is down more than $800 (nearly 29 percent) from May 2010 levels, but in most cases you still won't need to pay sticker; the average is still $2,017 per vehicle. While that still sounds like a very significant amount to be offering off the sticker price of a new car, it's the lowest incentive rate in nine years.

Toyota, which was still getting over its accelerator-related recall hearings a year ago and offering its highest incentives ever, is spending 54-percent less on incentives on its vehicles this May; it now has the lowest incentives among major automakers, at an average $877 per vehicle. Chrysler and GM are still doling out the most to move metal, at about $2,700 per vehicle for each—and still more than nine percent of the vehicle price. That said, both figures are down more than 25 percent from last year. Honda, Hyundai/Kia, and Nissan have each cut incentives more than 40 percent from year-ago levels.

[TrueCar]

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