Clark Howard: Demand for cars is driving up their prices

Consumer expert Clark Howard’s column appears here each Thursday in conjunction with Deal Spotter, a weekly print section in The Atlanta Journal-Constitution.

ClarkHowardJust a few years ago at the height of the recession when Americans were reluctant to buy anything, auto dealers simply couldn’t move their inventory. And cars were a screaming deal.

But now, purchasing is up, manufacturing is up and cars are moving off the lot as fast as they come in. It’s amazing how high car prices have jumped. Various reports put the average price of a new car in the U.S. today somewhere between $28,000-$30,000.

The recession changed the auto industry. It used to be all about market share, but now it’s about marketability, cutting excess and making sure that every vehicle produced gets sold.

This has affected the car rental business too. In recent years when cars were largely going unsold, car makers were dumping huge lots of excess vehicle inventory onto car rental lots. Rental lots were getting them so cheap that they were able to rent them to consumers at discount prices. (I remember getting a car for just $4 a day in Chicago several years ago — my all-time record low.)

Rental agencies used to sell off their fleet to used-car dealers after about six months to a year of use, but with increasing costs and scarcity, they’re holding on to them longer. Also, leasing was down during the recession.

There are a few conclusions to draw here: First, this is a great time to keep the vehicle you own as you wait this cycle out.

Second, if you have tired of your old car, or truly need to replace it, you’ll likely get more bang for your buck with a new car over a used car, even with the increase in prices. You should be able to fetch more money for your used vehicle right now.

Third, auto loan rates at this moment are about the best they’ve ever been.

-by Clark Howard, Save More, Spend Less, Avoid Rip-offs

Find more answers to your consumer questions, plus Clark’s new book “Living Large in Lean Times,” at ClarkHoward.com. Listen to his radio show live 1-3 p.m. Monday through Friday on WSB 750 AM and 95.5 FM.

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5 comments Add your comment

BFS

February 23rd, 2012
8:36 am

With gas prices as they are, the 40 mpg cars seem to be the way to go. My neighbor bought a Mazda 3 and was pleased with the mileage and performance. What are your thoghts, Clark?

BFS

February 23rd, 2012
8:37 am

mystery poster

February 23rd, 2012
4:27 pm

@BFS
I have a Mazda 3. I just love it, but it doesn’t get close to 40MPG. I get about 28 – 29 MPG, both on the highway and around town.

Ole Guy

February 24th, 2012
11:54 pm

Mystery, YOU know (or SHOULD know) that those advertised MPGs are automotive fools’ gold. Oh, they are, indeed, attainable, however, not without some MAJOR adjustments to your driving style…let’s use some pilot talk and refer to it as “driving technique”. I don’t have to enumerate all the issues; you probably know them, but, like many drivers out there, your probably too impatient to even try a few, like SLOW DOWN, don’t RACE TO THAT TRAFFIC LIGHT WHICH JUST TURNED RED, DON’T ACCELERATE DOWN HILL, ONLY TO SLAP ON THE BRAKES AT THAT CURVE AT THE BOTTOM OF THE HILL, ETC. There’s no big mystery here, just some common gd sense. It’s no easy task on roads already clogged with folks who would need six promotions to make idiot, but it IS attainable.

Harry the Hindu

February 27th, 2012
9:13 pm

American cars going up in price? Just another reason not to buy them.