Transaction Prices Climb In October (And GM Is Happy To See It)

November 1, 2013

If you went shopping for a new car last month and found the prices higher than usual, you weren't imagining things. According to KBB, transaction prices climbed a full percentage point between September and October of 2013 -- and thanks to automakers like General Motors, incentives aren't doing much to bring them back down.

There are two big reasons for the October price hikes:

1. Growing demand for new automobiles. As we all remember from high school, increased demand translates to increased prices. When sales are brisk, businesses can charge a premium for their product, earning extra dough and keeping supply in check.

2. New and redesigned models. Fall is prime time for the arrival of new models, and this October was no exception. While pricing for some vehicles remains flat from year to year, new and significantly refreshed models almost always cost more. 

On the whole, transaction prices climbed 1.2 percent in October, or about $367, making for an average new-care sale price of $32,184. (Interestingly, that's a slight drop from October of 2012, when new cars averaged $32,247.) 

Leading the pack on price increases was Honda, which is introducing several new and redesigned models this fall. Honda's average sale price hit $29,907 in October, a gain of 2.1 percent over September 2013 and 0.8 percent higher than October 2012.

In second place was General Motors, where prices averaged $35,268 in October. That's 1.6 percent above September and 0.2 percent above October 2012.

And according to the Wall Street Journal, prices for GM vehicles could remain high for the foreseeable future. WSJ reports that GM is trying to do away with discounts and other incentives -- both at the corporate level and at individual dealers. In fact, it's sent out 60 trainers to work with Chevrolet dealerships, explaining why discounts are such a bad idea at the moment and how to encourage sales without them.

For now, GM's high-priced gamble seems to be paying off. The automaker is expected to release sales stats today that show some of the company's strongest sales in years.

The problem is, over the years, GM customers have come to expect hefty discounts. What's more, GM's biggest competitor in the truck market, Ford, has been happily slashing prices on 2013 models of its hugely popular F-Series as 2014 models arrive in showrooms. How long can GM maintain its hardline stance against incentives? We'll keep you posted.


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