Toyota Doesn’t Think Car Prices Will Go in the Direction Consumers Want
Toyota has become known for its reliability, safety standards, and affordability. Their models tend to be great options for families looking to buy their first car. However, recently Toyota, along with other automakers, has become less affordable for average households. Here’s a look at the state of the American car market and why Toyota doesn’t believe car prices will return to normal anytime soon.
The pandemic influenced the increase in car prices
COVID-19 did a lot of damage to car prices, namely due to the shortages resulting from the pandemic, including the semiconductor chips. As a result of those shortages, automakers have been unable to build enough cars to meet the demand of car shoppers.
Due to that low supply of new cars, automakers and dealerships have also been able to raise the prices of the available cars because of market demand. Many drivers experienced sticker shock, which led to many people looking at used cars. Unfortunately, there are only so many high-quality used cars on the market. That massive influx of drivers looking for a used car led to used cars spiking in price as well.
This is what Toyota had to say about car prices
According to Autoblog, “there have been signs that things may cool off.” Since this was mainly a supply problem, the solution was to build enough cars to meet the demand of consumers. However, Jack Hollis, the head of sales for Toyota Motor North America, does not think that car prices will return to normal anytime soon.
Right now, the average transaction price of a new car in America is $49,507. That number was from January 2023, and Hollis expects that it will pass $50,000 sooner than later. That number is also a record, and it’s a similar story in terms of the luxury car segment. The average transaction price for a luxury car sat at $66,660.
There’s still a lot of pent-up demand, and that’s had some additional effects
The main reason Hollis doesn’t expect prices to return to normal anytime soon comes down to supply and demand. He said that American consumers still have a high demand for cars, and automakers are still unable to meet that demand by a large margin. According to him, Americans would buy upwards of 17 million new cars in 2023, but due to supply chain issues, automakers only expect to build and sell about 15 million new cars.
As a result, that’s 2 million cars Americans want but will have to find by looking elsewhere, namely in the used car market. That’s why the used car segment is expected to still be fairly expensive, though that may not be the case for every model on the used car market. Many used car models are already dropping from their peak prices.
According to the government, drivers were spending about 3.3% less on used cars and trucks in November 2022 compared to the year prior. Many used cars, including the Toyota RAV4, have seen a significant drop in price. The average price of a used RAV4, for example, dropped to $28,000, which represented an 8.9% decline in a few months. However, that’s still a much higher price than before the pandemic, so it’ll be a while before prices return to normal.