Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Shoppers Seek Alternatives as New Car Prices Climb

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Shoppers Seek Alternatives as New Car Prices Climb

Article excerpt

New car sales in the U.S. are expected to remain near historic highs this year, but there are some troubling signs under the hood for dealers and automakers alike.

Probably the biggest omen comes from consumers who increasingly are finding the price tags on new cars beyond their reach, industry experts say.

"Folks like you and I aren't coming in and buying cars at the dealership," said Charlie Chesbrough, senior economist at Atlanta-based Cox Automotive, owner of Kelley Blue Book and the car shopping site Autotrader.

As new car prices escalate, fewer people can afford the monthly payments, he said. The average transaction price for a new car is about $37,000.

"[Consumers] are being forced to find other means of transportation - ride-sharing services like Uber and Lyft - or enter into the used car market," Mr. Chesbrough said.

The trend is being amplified by young adults burdened by student debt.

"Some millennials are deciding it's more financially viable to forget about owning a vehicle and just use these ride-sharing services," he said.

Sales of more affordable off-lease cars have climbed steadily in recent years. These so-called gently used vehicles (from new to 4 years old) now make up more than 40% of the combined new and gently used market, up from about 30% in 2013, according to Mr. Chesbrough.

It's not hard to understand why.

In 2010, a 3-year-old used car cost an average of nearly $9,000 less than a new vehicle, according to the car buying and information site Edmunds. This year that spread widened to $13,500.

"Generally you can think of a 3-year-old vehicle as selling for 30% to 50% below a brand new version," Mr. Chesbrough said. "It's a significant savings."

As the economy slows, more people will be looking for ways to cut costs, "which could be quite a challenge" for the industry, he said. …

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