New vehicle transaction prices rose steadily throughout 2016, reaching a record level in December.
The average paid for a new light vehicle in December was $35,309, according to Kelley Blue Book.
KBB said that new-car prices increased by $521 (up 1.5 percent) from December 2015 to December 2016.
They rose by an alarming $166 (up 0.3 percent) just from November to December.
Tim Fleming, an analyst for Kelley Blue Book, points out that manufacturer incentives have grown to counterbalance the increased prices. In other words, consumers don’t really feel the increases in most cases.
Low interest rates have also contributed to this phenomenon, since lower-interest auto loans also help to shield vehicle price increases from consumers by keeping monthly payments low.
The party has to end at some point, though. There’s a limit to how far vehicle manufacturers can go with incentives and still make money on their products.
Also, rising interest rates will eventually start pushing monthly payments higher.
At some point, consumers will look for more affordable vehicle options.