Vehicle price increases outpace worker wage growth, study shows

The price to buy a new or used car is increasing at a faster rate than the average wage growth in the nation, a study said.

On Thursday, Anderson Economic Group, an East Lansing-based economic consulting firm, released the results of a recent analysis comparing new and used vehicle price increases against wage growth in the U.S. private sector. The study relied on data from the U.S. Bureau of Labor Statistics related to the Consumer Price Index to compare the cost of a new and used vehicle relative to average weekly earnings for private jobs.

It found that the average new car price last year increased by 11.8% in December compared with a year earlier. The average price of a used vehicle increased by 37.3% for the same period, according to Consumer Price Index data cited in the study.

But the average weekly earnings for all private jobs in the

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Average new car price hit record $47,077 in December

The car business is on a streak, but it’s bad one for consumers.

Auto dealership

Auto dealerships have record low inventories. (Jeff Gritchen/MediaNews Group/Orange County Register via Getty Images)

The average price paid for a new vehicle set a ninth-straight monthly record in December of $47,077, according to Kelley Blue Book.

New car incentives have hit five-year lows. (Jeff Gritchen/MediaNews Group/Orange County Register via Getty Images)

Low inventories caused by ongoing supply chain issues combined with high demand driven by an improving economy have reduced incentives to a five-year low and driven automakers to prioritize production of their most profitable models.

Lots at many dealerships are nearly empty, forcing operators to park the vehicles they have in strategic positions.

Lots at many dealerships are nearly empty, forcing operators to park the vehicles they have in strategic positions. (Jeff Gritchen/MediaNews Group/Orange County Register via Getty Images)

“December typically is the best month for luxury vehicle sales, and 2021 followed that trend in a big

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Analysts warn of possible used car price plunge in late 2022

A new report from Automotive News suggests that the current used vehicle price boom will die in late 2022 and early 2023.

Using data and analysis from consulting firm KPMG, it’s predicted that average used car prices will fall about 20-30% in a return to a normal relationship to new car prices. Of course, this is contingent on vehicle supply, of which KPMG believes will reach equilibrium around October 2022 and into 2023. 

Even if it takes until late 2022 for new car supply to catch up to demand, KPMG believes that used car prices will start their downward trend before then. This could happen because KPMG predicts that the market will anticipate greater new car supply and reduce used car prices to go along with it.

The dip that analysts believe is coming is going to be a sharp one. Used car prices are up about 42% on

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Which used cars in Chattanooga have had the biggest price increase?

Average used car prices are up 25% in Chattanooga from a year ago as shortages of computer chips and other supplies limit the inventory of new cars and car replacement parts.

A new study of more than 1.9 million car and truck sales last month by the online website iSeeCars found the typical used vehicle sold in Chattanooga in November for $6,410 more than the average used car price a year earlier. Nationally, used car prices rose even more, increasing an average 27.9%, or $6,939 compared to last year.

“Used car prices had drifted down, slightly, since they peaked in June, but they are back on the rise again,” said Karl Brauer, an analyst for iSeeCars. “With microchip shortage-related plant shutdowns persisting throughout the year, automakers have not kept pace with pent-up demand, and lingering supply constraints that are expected to continue well into 2022.”

Brent Morgan, president of Integrity

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