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Car Prices Up, Payments Down

Today, Consumer Affairs reported that November was a great month for car sales, in that, consumers were willing to up what they pay for a new car or truck. Additionally, Kelley Blue Book disclosed that the transaction price of a new vehicle was up 1.7% this past November, compared to a year ago.

This doesn’t necessarily mean that the price of new cars jumped up too rapidly, but instead that buyers are actually opting for fancier, more expensive models when they’re out shopping now. The average transaction price last month was $34,948, up $581 from November 2015. Conclusively, the numbers speak for themselves, as the average transaction price last month was $34,948, up $581 from November 2015.

“Climbing transaction prices reflect the shift in consumer preference from cars to more expensive trucks and SUVs,” said Tim Fleming, analyst for Kelley Blue Book. “Manufacturers with strong truck and SUV lineups are currently seeing record pricing, especially in these late fall months when these segments are especially popular.”

Oddly enough, this news broke on the same day as some bad news for the auto industry. Business Insider reported that “there are signs of stress in the subprime market segment, which has seen rapid growth.”

Apparently, the auto loan delinquency rate has been through the roof, dropping to 2% in the third quarter. The only other time these loans defaulted at 2% was in the direct aftermath of the financial crisis.

Business Insider also reported that “subprime auto loan originations hit $31.3 billion in the third quarter, down from $33.6 billion in the second quarter. Bank and credit unions originated $9.5 billion in subprime auto loans in the period, a record high.”

This appears to be not-so-great news for the auto industry. With these significantly higher transactions rates tangoing with a plethora of defaulting loans looks to spell out disaster for the industry if they can’t get a cap on these issues soon.

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