New car prices reach record highs, again, and dealers make record profits

June 24, 2022

The average transaction price customers have paid for a new car is expected to reach $45,844 this month, according to the latest report from J.D. Power. That's a 14.5% increase from one year ago.

At the same time, the constrained supply isn't hurting dealers. Dealer margins on every new car sold is on pace to hit $5,123 profit per unit, the same automotive analysis projected. That represents an increase of $1,174 from a year ago, and is more than double the usual pre-pandemic profit on a new car sold, including finance and insurance income. 

The last time we reported record high car prices by the same metrics, the record transaction price of $45,283 occurred in December of last year. The usual suspects of demand outstripping supply remain at play.  

“The inventory shortages that have depressed volumes, however driven up prices and profits, are showing no signs of improvement," Thomas King, president of data and analytics at J.D. Power, said in a statement. 

It may sound like more of the same, yet mid-year forecasts estimate total new-vehicle sales to decline about 20% from 2021. Rising inflation rates, a federal interest rate increase of 0.75%, and a cooling of the economy could back off consumer demand and allow supply to catch up and prices to level off. 

For now, however, interest rates for car loans continue to rise, dealer incentives remain low, and the average monthly finance payment is also on pace to reach record highs of $698 this month, according to the same analysis. That's an increase of nearly 13% from this time last year. The estimate depends on who's tracking the data: Edmunds.com projects a monthly bill of $657, while Moody's projects $712. 

Whatever the case, car shoppers are paying record amounts for new cars, and making record monthly payments to cover it. 

One silver lining in this storm cloud of automotive finance is the average trade-in value remains high, exceeding $10,000. 

J.D. Power remains optimistic. 

"With each additional month of inventory constraints, pent-up demand for new vehicles is building ever larger—and that demand will insulate the industry from the effects of these economic headwinds," King said. "As new-vehicle availability eventually improves, some softening of the current record per unit pricing and profitability may occur but will be mitigated by a return to higher monthly sales volumes.” 

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