Steep Price Increase on Trucks Not a Myth, Subprime Loans on Rise
Are Buyers Stretching Themselves Ever-Thinner to Afford New Trucks?
We’ve heard it from a lot of you, and we’ve observed and commented on it ourselves: trucks have gotten expensive. If that’s your perception, you’re not alone, and there’s data to prove that it’s not just anecdotal hearsay but fact. In data from Edmunds.com, the average transaction price on new fullsize trucks has gone from $31,413 in 2006 to $45,708 in 2016. For the pickup market overall, including midsize trucks, the price increase has gone from $29,698 to $43,565, a 46.7 percent increase. Surprisingly, the increase in prices for SUVs has gone up much more modestly, from $29,391 to $33,313 today. Part of that is attributable to the larger number of compact and subcompact SUVs on the market, which has kept the price of entry reasonable for consumers willing to give up a little size and space.
A parallel trend along with higher prices for trucks is the steep increase in subprime car loans, according to Bloomberg. Although tempting to assign a cause and effect relationship to the two, Jessica Caldwell, senior analyst for Edmunds.com, says she believes it’s driven more by the OEMs wanting to maintain sales growth. “A big thing that we see is to keep that growth engine going, you have to work your way down the credit tiers. You make your portfolio a bit riskier, offer lower interest rates, and longer loan terms. Higher prices complement this trend.”
In terms of the primary driver of the price increases on trucks, Caldwell sees the increase in content and features being the main driver of higher prices. Another interesting trend noted with trucks is the increase in leasing, which now stands at around 15 percent. Historically, leasing on pickups has been close to zero. The big driver with truck leases is the high retained residual value, which makes it a good option for both customers and dealers.
What’s your experience been? Have you gone truck shopping lately? Did you buy new or used? Do you think truck prices are out of control or do you think the price premiums are worth it for the amount of features and capability you get with today’s trucks?
Source: Edmunds, Bloomberg