Newspaper article St Louis Post-Dispatch (MO)

As Demand for Cars Falters, Auto Prices Are Poised to Fall

Newspaper article St Louis Post-Dispatch (MO)

As Demand for Cars Falters, Auto Prices Are Poised to Fall

Article excerpt

DETROIT * While the U.S. inched its way out of the Great Recession, consumers went car shopping in droves. As sales rebounded, the price of cars and trucks rose to record highs.

Now, the price trend is set to reverse itself, partly because some buyers are unwilling or unable to pay the high prices and instead are opting for used cars.

Although overall industry sales are tracking last year's record of 17.5 million, many automakers are selling more cars to rental companies to maintain the momentum. Sales to consumers are declining, so companies are ramping up incentives. Discounts in September hit a level not seen since automakers were desperate for sales during the financial crisis in late 2008.

"Inherently, you're seeing a price war," says John Mendel, executive vice president of Honda North America. "You're already seeing the pricing pressure."

Analysts say the deals will only get better during the next two years as millions of leased cars flood the used-car market and pull new-car prices down.

Auto prices have risen every year since the Great Recession, and hit a record average of $31,825 in December, according to J.D. Power. The average price in September was $30,862, an all-time high for the month. Prices have remained elevated largely because buyers are still paying top dollar for red-hot segments such as crossovers and big SUVs, which cost more than sedans.

Now, many analysts say the perfect climate is developing to pull prices lower soon:

Slowing sales: It may be high prices or it may be good deals on late-model used cars, but sales of new vehicles have plateaued, and even fallen for the past two months. That is forcing discounts from automakers to keep market share. September incentives hit a record $3,888 per vehicle, beating the old mark set in 2008, according to J. …

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