Latest / Auto Collabs / Why the Average Car Price Is Misleading Everyone with Erin Keating | Auto Collabs

Transcript

Why the Average Car Price Is Misleading Everyone with Erin Keating | Auto Collabs · Auto Collabs

• 0:00
  On this episode of Auto Collabs, we're live at the Washington, D.C. Auto Show for Public Policy Day 2026, brought to you by our friends at Safelite.
• 0:12
  All right, here we are, Public Policy Day 2026 with our friend Erin Keating, executive analyst with Cox Automotive. Thank you for giving us a few minutes today. Always good to see you guys. Thanks for having me. Yeah.
• 0:21
  All right, so, um, everyone's talking about affordability. A day doesn't go by where we don't talk about it, covering the news or speaking with a dealer or speaking with somebody. Right.
• 0:30
  Um, so we thought it'd be great to get your perspective because one of the stats that's being, uh, thrown around a lot now is the average price of a new vehicle, $50,000, and we can watch that go over and under every day now, like a stock ticker.
• 0:41
  Yeah. But, but it's hovering right there. Uh, what is your perspective, and what are you seeing as you take a look at everything from a broad view?
• 0:47
  Yeah, I mean, I think it's important because obviously Cox Automotive, Kelley Blue Book, is typically the one that's quoted the most when it comes to average transaction price, right? That's right.
• 0:54
  And yes, it is around $50,000. But average transaction price is a backward-looking number. You know, that's us looking at what happened in sales the last 30 days.
• 1:02
  So what it is telling us is that the market is buying bigger and more expensive vehicles for sure because the more vehicles that are over 80, $90,000- Dragging that average up... dragging that average up.
• 1:12
  But it doesn't tell us what the full story is. It doesn't tell us what's on dealer lots, and we know that still over 40% of vehicles transact under $35,000. Wow.
• 1:21
  And that inventory is still there in that under $35,000, um, range.
• 1:26
  So there's plenty of optionality and, you know, what the Chevrolet Trax and, uh, Ford Maverick were some of the best sellers last year, and those are less expensive, smaller vehicles.
• 1:36
  Um, so yes, the average transaction price is going up, but, you know, it's really not... We haven't had inflationary pressures like people have been talking about over the last few years.
• 1:43
  We've had maybe prices go up by one, 1.5% since 2022 each year, which is well below inflation. That really feels like a- Right?... contrarian thing- Yes... that what we hear.
• 1:53
  Because I think the distinction here is, is we're not talking about the average price of a vehicle.
• 1:57
  We're talking about the average transaction price, which means more people have access to the funds to buy the higher priced vehicles. Right. Uh, and, and as the, the prices of the highest vehicles go up- Right...
• 2:07
  those people ke- keep buying them. Yes. But by and large, the, the, the actual purchases that, that make up the larger swath of it sit in that more affordable range still.
• 2:18
  Right, and they've stayed that way for quite some time. You know, again, up until 2020, we were seeing on average prices rise about three, 3.5% every year, and that was normal. That kept up with inflationary pressures.
• 2:28
  And then we saw that huge step change happen between 2020 and 2022. And yes, supply and demand factors came in, the chip shortage, et cetera, et cetera, really ballooned prices on average by about 9%. Mm-hmm.
• 2:40
  Once you let that genie out of the bottle, you can't get it back very easily, right? That's right. So price, you know, baseline started a little bit higher than we expected.
• 2:47
  But since then we've been, you know, riding a short little wave here. And so yes, tariffs are probably gonna bring in a little bit higher increase this year.
• 2:53
  But to your point, there's still plenty of vehicles that are available, and interest rates are more than anything what's really hurting people when they're looking at that monthly payment. Mm.
• 3:01
  It's not so much the actual price of the vehicle, right? Yeah.
• 3:05
  I- I think one of the downstream impacts that we're not talking about a, a ton, uh, uh, you know, we actually had a conversation earlier today about how the trailing SAR, uh- Right...
• 3:16
  you know, that, that has been much less than what we expected maybe to grow, and now the affordability creating, uh, a purchase pattern more on used cars. Right.
• 3:25
  Uh, what's the downstream impact of affordability on new cars and, and the purchase behavior over the last few years have on the used car market over the next year or two? I mean, it's interesting.
• 3:35
  We are finally starting to get more used cars back into the system, of course, because we are s- we went through that dearth last year where we had the lowest amount of used cars returning back to market, one to three-year-old vehicles.
• 3:45
  So it is actually getting better. But yes, of course, new cars and used cars are very t- closely tied together when it comes to pricing.
• 3:52
  One of the, the things that I think is gonna be really interesting for the next few years is for people to get really used to the fact that an affordable option might be a used electric vehicle. Yes.
• 4:00
  We're gonna have a lot more electric vehicles entering into the used car market over the next few years because of all of that leasing that happened- Mm-hmm... with the leasing loophole. And they're really good cars.
• 4:10
  The batteries aren't degrading, uh, and they're of good values.
• 4:13
  And so I think it's gonna be really interesting to watch the dealers that really make the choice to invest in knowledge around electric vehicles and hang on to them on trade-ins and such are gonna be the ones that have good, affordable options for people who are looking for used cars in those price ranges.
• 4:27
  I think what we're seeing are that the dealers who leaned in during, like, I'll call it, like, it was, like, the EV, I don't know, I wanna call it a heyday, but it wasn't a heyday. [laughs] But it kind of was- Kinda...
• 4:38
  'cause it was gonna be the future- Right... and 2030s here, and it's like, but- Well, if you just take August and September, it was for sure a heyday. It was. It was. [laughs] That, that was a legitimate heyday. Yes.
• 4:45
  But, but the ones who did adopt the technology and say, "We're gonna learn," they are disproportionately prepared- Right... for the market we're heading into. And so if- Sure...
• 4:54
  you weren't like that, you really need to play catch-up. Absolutely. Yeah. I mean, again, they're great technology, as I think, uh, Colin Shaw was just saying.
• 5:02
  Just put your butt in a seat and you'll see what, what the car is like and how good they are. And, uh, again, all of our cars these days are so technologically advanced. People are driving around older vehicles.
• 5:12
  They're going to have a little shock to the system when they get to that dealership to look at a new car, even one that's one to three year old or four to six year old, which we know people are trading down even lower into the cost spectrum because of affordability challenges.
• 5:23
  They're still much better than cars they might have been driving that are 10 years old, 12 years old, 13 years old.
• 5:29
  So we're pretty confident that people are gonna be able to find the right vehicle for them at the right price. Um, but for sure there's some hesitancy out in the market.
• 5:38
  You know, consumer sentiment is a little bit, I think Jeremy Rob, our, our, uh, interim chief economist referred to it as the wind chill economy. You know, might f- That's really good...
• 5:45
  might be 40 degrees outside, but it feels like it's 30 because you're just a little bit on edge, just a little worried. But honestly, wage inflation has been growing.
• 5:53
  More people have been migrating into that upper income as household that is affording the more expensive cars. So I think the affordability topic is important. Mm-hmm.
• 6:02
  But I think it's one that can sometimes be, um, conflated with the idea that there is just nothing available for people, and that's just simply not true. Yeah.
• 6:10
  Uh, the, the thing I wanna double click on real quick before we end is, is really kind of, you, you said it very quickly, but you said, "The batteries aren't degrading." Yeah.
• 6:19
  I think that was something that we had a lot of concern at early- Sure...
• 6:22
  when EVs were coming online and, uh, you know, it was like, well, they're gonna degrade, and then the vehicles are gonna be worth nothing in- Right... four or five years. Right. But we're not seeing that. No.
• 6:31
  Um, how is that trend impacting, like you said, this kind of like longer tail of a used EV? Right. Well, I think more and more people, again, we, it's human behavior. People needed to get used to being around EVs.
• 6:41
  And to your point, we did have a boom. We had an explosion. So I like to say the Bader Meinhof theory is gonna come in. You're gonna see more EVs. [laughs] Right. You're gonna like them. They're everywhere.
• 6:48
  You're gonna test them more, right? Look at them. Yeah. They're everywhere. Um, but yes, we, you know, we through Cox Automotive, we have EV battery solutions.
• 6:54
  I believe you had one of my colleagues on earlier today, and we've incorporated some technology into our Kelley Blue Book and Autotrader, uh, shopping platforms where we can tell you what the EV battery health is of vehicles.
• 7:05
  And w- as we've been measuring them over the m- multiple years we've been having hundreds of thousands of cars come through our Manheim auctions, we have not seen the degradation in the batteries that people were worried about.
• 7:15
  That's wild. They're keeping healthy. Quite the opposite, actually. Quite the opposite, actually. Actually, they're degrading less than we thought they would.
• 7:19
  Le- way less than we thought they were, and they're all staying up in the 90 percentile.
• 7:23
  Um, so I think people are gonna start to grow a lot more confident in the fact that, again, I think we talked about this last year, it's just an alternative powertrain.
• 7:30
  You know, you're fueling with electrons as opposed to gas. It's way better to drive, let's be honest. [laughs] I, I actually converted.
• 7:35
  I was one of those people that were all up in- Me too, and the last year I have as well. Yeah. Exactly. And, um- And, like, I never wanna go back. No, never.
• 7:41
  I mean, that center of gravity and how powerful the cars are- Yes... it's just like if you're- Control... if you're a gear head, it's just- Control... yeah. Exactly. It's the kind of car you want. Yeah.
• 7:47
  Well, Anne, thank you so much for spending some time with us- Sure... and giving a little, us a little bit of, you know, great perspective on- Yeah... like, hey, the sky isn't falling. Yeah.
• 7:54
  Just look at it the right way. Just look at it the right way. Yeah. Yeah. So thank you. It's always great to see you guys. Yeah.