New-Vehicle Retail Sales Price Hikes During the Model Year Have Become a Thing of the Past

WESTLAKE VILLAGE, Calif., Sept. 18 -- Competitive pressures are nearly eliminating new-vehicle price increases during a model year, according to real-time retail transaction data from the Power Information Network (PIN), a division of J.D. Power and Associates. To better reflect consumer demand for new vehicles, PIN data includes retail transactions only and does not include fleet sales.

During the 2006 model year, actual new-vehicle retail transaction prices for 44 of 50 high-volume models have declined. This pricing includes powertrain and body type, normalized for all months. The prices for the remaining six models have increased slightly since the beginning of the year. Four of the six models exhibiting price increases had an actual retail transaction price increase of less than 2 percent.

"The midyear price increases to cover increased costs, once commonplace in the industry, have disappeared," said Tom Libby, senior director of industry analysis at PIN. "Intense competition, fueled in part by the continued expansion of Asian and European manufacturers into new segments, as well as shortened product life cycles that are bringing new models to market faster than ever, has kept downward pressure on new-vehicle prices."

There are more than 286 new-vehicle models available in the U.S. market today, compared to 257 just five years ago.

The 50 models used in the analysis represent 48 percent of total U.S. new-vehicle sales volume and are many of the most popular models in the industry, covering a wide array of body types, manufacturers and brands.

PIN finds that the only instances in which new-vehicle retail transaction prices generally rise are when a model is replaced with an all-new design or when a new model year begins.

"Along with the dampening of price changes is the growing realization that the volatility of rebates and other incentive programs is being greatly reduced from past years," said Bob Schnorbus, chief economist at J.D. Power and Associates. "Consumers have not yet adjusted to the fact that they no longer have to wait for a blowout incentive program to get a great deal on a new vehicle."

About Power Information Network (PIN)

PIN's automotive solutions are based on the collection and analysis of daily new- and used-vehicle retail transaction information from more than 10,000 automotive dealership franchises in North America. PIN's industry-leading automotive solutions incorporate consumer demand and sales information to improve business for automotive dealers, manufacturers, lenders, and other companies in the industry. Additional information is available at www.powerinfonet.com

About J.D. Power and Associates

Headquartered in Westlake Village, Calif., J.D. Power and Associates is an ISO 9001-registered global marketing information services firm operating in key business sectors including market research, forecasting, consulting, training and customer satisfaction. The firm's quality and satisfaction measurements are based on responses from millions of consumers annually. J.D. Power and Associates is a business unit of The McGraw-Hill Companies.

About The McGraw-Hill Companies

Founded in 1888, The McGraw-Hill Companies is a leading global information services provider meeting worldwide needs in the financial services, education and business information markets through leading brands such as Standard & Poor's, McGraw-Hill Education, BusinessWeek and J.D. Power and Associates. The Corporation has more than 290 offices in 38 countries. Sales in 2005 were $6.0 billion. Additional information is available at http://www.mcgraw-hill.com/.