Car Prices Go Up, But Payments Remain the Same
Automobile manufacturers and dealers have been trying to find a balance in how much they sell vehicles for and how much consumers are willing to pay for them. J.D. Power, one of the auto industry’s most trusted names, recently did a study on changes in new-vehicle demand in the U.S. automotive market. Simply put, they found that while before 2007 manufacturers were content with selling a lot of cars at a lower price – this led to a lot of people buying cars they perhaps could not afford. Now, though, times are changing – today, manufacturers want to sell fewer cars, but at higher prices. The catch: customers don’t really see the total increase because their overall monthly payments are relatively the same as they would have been before the Great Recession.
Compact and subcompact cars now dominate that market – almost 45% of all vehicles sold so far in 2013 are either a compact or a subcompact. When compared to just six or seven years ago, the differences are staggering. Today, more and more people are looking at economy over style, but perhaps the biggest problem is the fact that interest rates could raise, which could theoretically lead to higher monthly payments – and less people buying cars because of it. The used car market is really strong, however, with newer cars showing some of the highest resale values in recent memory. This, coupled with longer loan terms and high used car prices, could also impact the rise in loan interest rates. However, automobile manufacturers and dealerships could continue to offer the same great incentives, thus essentially cancelling out the price hike.
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