The Rolling Stones memorably sang, “You can’t get what you want, but you get what you need. “But knowledge from multiple sources shows that many car buyers not only don’t get what they want, but settle for cars that slightly satisfy their desires based solely on value.
With average new vehicle transaction costs still hovering around $50,000, that’s too expensive for many consumers who might have had their eyes set on a full-size pickup truck or SUV. What happens is that those who just want or desire a new set of wheels hold their nose and think small.
“We can see sub-compact SUV, compact SUV and compact cars having the largest market share gains in 2024 combined,” said Charlie Chesbrough, senior economist at Cox Automotive, during the company’s end of year presentation on Tuesday. “They increased total share by over 2% and what products lost? Mid-sized SUV, mid-sized and full-size pickups combined lost nearly 1.4% market share. It appears consumers are shifting to smaller, more affordable products.”
To illustrate the point Chesbrough cited the Chevrolet Trax, the lowest priced vehicle in the General Motors Co. lineup, as the automaker’s biggest volume gainer.
Because Honda, which has gained part of a percentage point of the market in the United States in 2024, can credit a more than 20% increase in sales of its two least-loved vehicles, the HRV and the Civic, Chesbrough said.
The good news for shoppers on a tight budget is there’s a growing supply of lower priced vehicles from which to choose.
“A positive shift for 2025 is that the inventory of new vehicles priced under $30,000 increased by 42% year over year in November, delivering some comfort for budget-conscious buyers,” declared the Cars.com 2025 Automotive Trends report released this week.
Where used car lots have traditionally been a sound plan B for shoppers looking for bargains, that’s not so much the case right now, even as incentives climbed to an average of 8% of retail price in November.
Indeed, the impact of the higher incentive deals on used prices has diminished, noted Jeremy Robb, Cox Automotive senior director of economic and industry insights.
“In fact, we’ve actually seen higher used retail prices in almost every week since September, and now we’re just 2.6% lower than where we were last year,” said Robb during Tuesday’s presentation. “Affordability could continue to improve for used transactions, but it seems like it’s going to be driven by declines in interest rates from here out, as supply is tighter and prices look like they fit their low point.”
Electrified vehicles, whether natural battery electric or hybrid, are also more affordable, according to CarGurus’ summary for 2024 and prospects for 2025.
The 2024 Toyota Prius is a hybrid vehicle that is gaining sales.
The average list value of new hybrids fell 9. 5% in 2024, to $47,600. That put hybrids below the $47,800 median value for internal combustion engine vehicles, Kevin Roberts, director of industry insights and analysis at CarGurus, wrote in the report.
“Meanwhile, the costs of new electric vehicles fell 1. 3 per cent during the same period, to $62,000. As a result, prices for electric cars increased compared to hybrids (nearly $15,000), even after accounting for federal tax credits decline consistent with monthly payments, hybrids presented a more attractive package, without diversity or collection concerns,” Roberts wrote.
The story is different, however, in the used vehicle market with Roberts noting a limited supply of used hybrids, coupled with strong consumer demand, led to a 4.4% increase in the average list price ($33.6K).
“By contrast, used EV prices declined 5.7% to $37.5K, while ICE vehicles dropped 3.2% to $27K,” Roberts noted. “Although used hybrids haven’t yet achieved price parity with ICE vehicles, they remain an attractive option, with sales continuing to climb.”
Electric vehicles stabilized in November, according to Stephanie Valdez Streaty, director of industrial research at Cox Automotive.
She predicted they could simply be passed on.
“Looking ahead to 2025 several factors will influence the average transaction price of EVs,” said Streaty during the Cox presentation. “These include declining battery costs due to technological advancements with lithium ion battery pack prices expected to reach around $104 per kilowatt by 2025. This significant drop is driven by economies of scale, advancements in battery technology and lower costs for raw materials and components.”
With Donald Trump’s return to the White House in January and his stated goal of imposing additional price lists on imports and federal tax credits for electric vehicles, as well as uncertainty about the direction of interest rates, customer habit is equally uncertain.
In fact, CarGurus’ Roberts notes, customer tastes are fickle. They might be thinking smaller now, but once the economic winds take over, so do their choices, he writes, “history shows that American customers revert to their old tactics when the market situation improves. ” “.
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