First, let's take a closer look at what is happening in the car market today. For comparison, let’s take the prices from May 2022 and the prices of one year before, May 2021. Over the year, new car prices were rising gradually, about 1% each month. As of May, new car prices in the United States averaged at $47,148. That's up from a year before by $5,613, or 13.5%. Slightly more expensive prices were seen in December 2021. The average transaction price (ATP) was at about $47,202 back then.
The number of cars produced has declined in recent months. At the same time, customer demand has remained unchanged. So dealers are selling inventory, but at a price higher than the manufacturer's suggested retail price (MSRP). During 2022, almost all cars were sold at an elevated price compared to 2021.
But there are some differences in the luxury and non-luxury car segments of the retail market. It's worth noting that a year ago, non-luxury vehicles were selling below the MSRP. This year, buyers of new non-luxury vehicles are paying an average of $43,338 per new car. That's about $1,030 above the sticker price.
The demand for luxury cars is quite high. Luxury vehicles now make up 17.3% of all sales in the automobile market. This is much higher than a year ago. In May 2021, the luxury vehicles market share was 15.9%. Before the COVID-19 pandemic, it was 13.1% of all sales. Today, the average value of a luxury car is $65,379. That's $1,071 above the MSRP. A year ago, the average cost of a car was lower than MSRP by about $1,300. But still the cost of cars in the luxury segment, as opposed to non-luxury cars, is decreasing each month.
There is an interesting trend in the electric car market. The average cost of an electric vehicle in 2022 is gradually decreasing. This is primarily due to the emergence of more budget-friendly models of electric cars, which offset the expensive luxury models. But still, the average cost of an electric vehicle is about $64,000 at the moment.
A very high increase in prices is observed among trucks, SUVs, and vans. For example, the ATP of trucks today is $56,216. That's $888 more than the previous year. The average SUV is up $526 and now equals $46,073. The cost of vans has increased by $726 over last year. Consumers will now pay an average of $48,671 for a new van.
As you can see, the situation in the market is not very positive. And the car market outlook isn’t very optimistic either. But what is the reason for this increase in vehicle prices in 2022? In the next section, we will look at the factors that have had a tangible impact on the changes in the car market.
