The data is in for 2019 and it shows if you want a new full-size pickup, you had better pony up even more cash for it. Edmunds.com says the average full-size transaction price grew again to a record $49,534 with no signs of slowing down. Here is what is going on and why that price continues to climb.
Before we get into the whys of the record average transaction prices, we should first start by looking back at what has changed in the past several years with regards to prices.
Edmunds data in an October, 2018 Detroit Free Press story shows the average full-size transaction price in 2008, before incentives and dealer fees, was $35,000. While this seems much better than the nearly $50,000 record we have today, there is a caveat here that this was during the recession. During the recession, the number of vehicles sold plummeted with most customers buying up the lowest priced trucks they could find. In total, the 2009 model year saw full-size pickup sales plunge 30 percent to less than 1.5 million trucks. For 2019, this number rose to just less than 2.5 million trucks sold.
Flash forward to 2013, the average transaction price grew to $41,680 – a jump of 17 percent. This number was post-recession and likely more accurately reflected what the average transaction price really was. Still, a 17 percent growth in just 5 years is pretty substantial.
Now, jump to 2019, and we see the price has jumped again to $49,534 – a 16 percent increase. This time, we have a 6 year difference and about the same price increase. While, sure a nearly $50,000 average new truck price is going to grab some attention, it isn’t a total surprise when you consider this is the way the market has been heading for years.
Another thing to consider is the impact on inflation. Things have certainly changed since 2008 and you can’t get much for a penny these days. According to the U.S. Bureau of Labor Statistics Inflation Calculator, the $35,000 average transaction price in 2008 would be the equivalent of $42,609.86 today. This means most consumers are still seeing an average of about 15 percent increase in new truck prices even with inflation.
Besides inflation, destination fees have certainly changed over the years. A 2019 Pickuptrucks.com story, points out the average destination fees in 2007 used to be sub-$1000. Now? Try more than $1,500 in, the non-negotiable, destination fees. The story points to several factors as the reason including larger trucks occupying more space on railcars, higher insurance, higher wages and less shipping personnel attributing to the rise in costs.
Finally, one other factor is in play when looking at these prices – incentives. Back in 2010, Chrysler was struggling to sell pickups so it offered $3,000 off or zero percent financing for 60 months according to a 2010 PickupTrucks.com story. This was considered quite a bit of money off on a new pickup. Now? Not so much. The Ram 1500 saw year-end incentives as high as $12,000 in certain markets to close out the 2019 year according to a U.S. News and World Report story. That is nearly 4 times as much cash off on a truck that is about $14,000 more expensive than it used to be. In fact, it is really just $2,000 shy of completely covering the price difference between 2008 and 2019.
Anyone following the full-size truck market knows part of the average transaction price growth is directly related to the growth in so-called luxury trucks aka Cowboy Cadillacs. These luxury trucks first hit the market back in the 2000s with the introduction of models like the Ford F-150 King Ranch. Bathed in leather, filled with features and unique badging, it was unlike anything people had seen before. This truck started the trend of customers thinking beyond power windows and power locks as the higher trim level and instead they saw this whole new category.
Back in 2008, BlueOvalTech.com says the King Ranch wasn’t actually the top trim. The Harley Davidson edition claimed that spot with a starting MSRP of $36,500 and the King Ranch came in second at $35,495. This was quite the price difference between the base, regular cab, 2wd truck that started at $17,345. However, this difference is nothing compared to today.
In today’s market, all manufacturers offer a luxury trim of their pickup trucks. Staying with Ford, they not only still offer the King Ranch, they have added now two trims above it – Platinum and Limited. The Limited trim, the now highest level of Ford half-ton trucks, starts at $67,485 while the lowest XL trim starts at $28,495. This represents a $38,990 difference (basically 2.5 XL trucks for one Limited), but that’s not all. Checking all the options on the Limited trim can add another $9,420 to the total price.
Several automakers have shared with us, they are aiming to sell about 10-15 percent of their trucks with the highest trim level available – the luxury trucks. Ford sold 896,526 F-Series trucks last year which includes F-150 through F-450. This would mean they sold around 90,000 luxury trucks on the low end including higher trim Super Duty (HD) trucks. It isn’t hard to imagine how much that skews the average transaction price.
CAFE – Fuel Economy Regulations
Another factor in driving truck prices higher is going to be Corporate Average Fuel Economy regulations known as CAFE. This law sets the average fuel economy for an entire manufacturers lineup and has been in place for years.
“First enacted by Congress in 1975, the purpose of CAFE is to reduce energy consumption by increasing the fuel economy of cars and light trucks. The CAFE standards are fleet-wide averages that must be achieved by each automaker for its car and truck fleet, each year, since 1978,” Transportation Department statement.
This plays a large impact on full-size truck sales since the calculation on the CAFE number changed in 2012 to a vehicle’s footprint. Basically, the larger the vehicle, the less stringent fuel economy it has to achieve. However, it still has to meet rising fuel economy standards or the company pays a fine.
While automakers argue the higher standards inversely impacts their full-size trucks sales, there is some disagreement on this point.
Even though the EPA argues this shouldn’t play that large of an impact, the reality is it has played a big impact already. Along with the continuing free-fall of sedan sales in the U.S. and the booming full-size vehicle sales, there is even more pressure on automakers to improve their fuel economy. It used to be if you sold an equal amount of cars to the number of trucks you sold, the sales would offset yourself. Toss in some electric vehicle sales and you are golden.
Again, this hasn’t been the reality. For example, Fiat-Chrysler Automobiles will pay a fine of $79.4 million for not hitting its CAFE goals for the 2017 model year (this is on top of a $77 million fine the year before).
Now, you maybe wondering why does CAFE affect new vehicle pricing? You see this impact in the new trucks powertrains which are getting more complex, more costly to build and more expensive to repair. For example, Ram trucks now has a 48-volt hybrid system standard on its base V6 engine. Ford has been selling a turbo-charged 3.5L EcoBoost engine for years and has now increased the availability of a turbocharged engine with a 2.7L six cylinder. GM has followed suit with a small 2.7L four-cylinder as well as a more advanced cylinder deactivation system. Add in the fact, these three big players in the truck market all offer new transmission with upwards of 10 different gears and you have the most advanced powertrains ever on the market for the segment.
These powertrains make a difference as well. In 2009, the best highway fuel economy a gasoline-powered Ford truck could achieve was 20 MPG. Now, the best 2019 2.7L Ford truck for highway fuel economy achieves 26 MPG. This is a 24 percent improvement in fuel economy in just a decade.
Truck Build Materials
Another large factor impacting the average transaction price is build materials. Years ago, trucks were built out of steel. Steel doors, frames, tailgates, engine blocks, etc… everything was steel. This isn’t the case at all today.
Newer trucks like the 2019 Chevy Silverado has such a massive list of different metals it uses, it almost requires an engineering degree to figure out how these metals work together. From aluminum to high-strength steel and now adding in carbon fiber beds, the 2020 market is full of trucks with an array of metals.
Why does this matter? Expense. New metals, new engineering, new build processes all add up to additional costs passed on to the consumer one way or another.
Standard Safety Equipment
Yet, another factor is the growth of standard safety equipment. Years ago, trucks barely came with seat belts and power brakes. Now, standard, and often mandatory, safety equipment like back-up cameras, airbags, anti-lock brakes, electronic stability control, and more are making trucks safer, but also more expensive.
This standard safety equipment is spurned on by testing down at the IIHS and NHTSA which both raise the bar each year making it harder for trucks to win the coveted top safety rating tiers. Those organizations keep adding more tests like the small overlap crash test. This test aims to make vehicles safer, a good thing, at the expense of truck makers adding more metal to their frames to make the trucks pass the tests. This kind of testing does indeed safe lives, it also impacts prices.
These standard and mandatory safety equipment items are hard to argue against and yet, they are simply a factor in the increase in truck prices.
Changing Consumer Needs
Finally, the last factor making a change is the changing consumer needs. A decade ago, you could find a large variety of regular cab trucks with manual transmissions on many dealer lots. Now? Not so much. The crew cab pickup is taking over according to Edmunds.
“Trucks are growing increasingly popular as an alternative to SUVs. The ongoing expansion of ‘lifestyle trucks’ is expected to push the crew-cab segment to new record highs: Edmunds analysts predict that crew cabs will constitute 80% of all truck sales in 2020.”
Now the most popular configuration seems to be a crew cab pickup, V8 engine and automatic transmission. In fact, there are no longer any manual transmission half-ton or heavy-duty trucks for sale and many truck makers are discontinuing the regular cab option. This means you are really forced into buying a larger truck with a higher price tag.
Plus, Edmunds said the full-size truck market share hit 14.4% in 2019, the highest level seen since 2005 when it reached 15.1%.
These higher prices and demand are also changing the loan market with the average loan length now reaching unheard of levels with consumers seemingly ok with these terms.
The latest loan data from Edmunds is just shocking.
|January 2020||January 2019||January 2015|
|January 2020||January 2019||January 2015|
While new trucks have certainly gained significantly in price, these top factors are really forcing the change. What will happen in the future? Will full-size trucks creep over the $50,000 mark? Most likely and this trend isn’t slowing down any time soon.