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June 27, 2003

USA: Car prices are deflating, but buyers are buying more cars – Edmunds.com

Edmunds.com the online resource for automotive purchase information, has found that manufacturer-to-consumer incentives and rebates spur higher spending by new car buyers, while prices for cars in general continue to fall.

By bcusack

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Edmunds.com the online resource for automotive purchase information, has found that manufacturer-to-consumer incentives and rebates spur higher spending by new car buyers, while prices for cars in general continue to fall.

“Incentives and rebates, excessive inventories and the competitive market environment have pushed down the values of vehicles, but our research shows many consumers apply these savings to their purchases by buying more optional equipment and more luxurious vehicles than they otherwise would,” said Dr. Jane Liu, Executive Director of Data Analysis for Edmunds.com. “However, our price index shows that, apples-to-apples, light vehicle prices fell 0.3% between April and May.”

Not including rebates and incentives, the average transaction price for new vehicles has increased from $25,152 in May 2002 to $26,442 in May 2003. By country of origin, the Korean manufacturers had the highest increase in their average transaction prices, up 9.8% from $16,315 in May 2002 to $17,919 in May 2003. Of all manufacturers, Kia enjoyed the highest average transaction price increase, up 14.5% from $16,062 in May 2002 to $18,390 in May 2003. Land Rover, Nissan and Hyundai closely followed. With respect to specific models, the GMC Sierra 2500 had the highest average transaction price increase, up 14.5% from $22,972 in May 2002 to $26,304 in May 2003. Other significant transaction price increases occurred for the Lincoln Navigator, Toyota Sienna, Dodge Ram 3500 and Saturn L-Series.

Studying a fixed basket of new vehicles with fixed options over time presents a different picture. In May 2003, the Edmunds Price Index for new vehicles (EPI-N) was down to 97.1 from its base reference point of 100 in January 2002, reflecting a 0.3% decrease from April 2003. Most vehicle categories reflect a steady decline since January 2002. Compact SUVs and compact cars have each dropped more than 5% in this period, to 94.6 and 94.9, respectively.

This data was released with the Edmunds Price Index for new vehicles (EPI-N), which reflects price shifts for the industry as a whole. Similar to the Consumer Price Index, the EPI-N measures the average changes in retail prices for a fixed basket of new vehicles with fixed options over time for the purpose of trend analysis. Edmunds.com’s data reflects transaction prices as well as manufacturer-to-consumer rebates, including low APR and special lease programs.

“By using a price index based on the most accurate transaction and incentives data in the marketplace, automakers, financial institutions and other interested parties have a more precise tool for analyzing price trends and the industry overall,” said Jeremy Anwyl, President of Edmunds.com.

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