Buyers take midyear US car price hikes in stride
Detroit has raised prices on its cars and trucks again. It's the first time since 1980 that automakers revved prices across the board more than once in the model year. The analysts say it's to fill the corporate coffers before the next downturn. The automakers say it's because their costs have gone up.
Whatever the reason, and it is likely a combination of both, the dealers don't think consumers will be stopped by the increases, which they call moderate. ``It hasn't created any resistance'' to sales, says Robert Heinz, manager of new car sales at Warren Biggs Chevrolet in Los Angeles. ``The biggest increases have been on the big cars . . . and we've had such a shortage of big cars. People are still waiting,'' he said.
It's not as dramatic as the sticker shock of the '70s, when dealers announced increases every quarter and the price of some cars varoomed out of sight when they roared up by more than 20 percent in a year.
For the average General Motors car, base prices rose this month by 2.3 percent, or $296, including increases in options. Chrysler came in lower, at 0.9 percent, or $106 per car, including options, and on Friday, American Motors Corporation announced 1.2 percent increases ($200) on its Jeeps.
Although it did mark up light trucks by $120, Ford decided not to raise prices -- yet -- on its cars. The company has ``chosen not to increase prices of its 1985 cars at this time in an effort to maintain the continuation of the sales momentum . . . ,'' a Ford press release said.
Some analysts are surprised by the timing of the move. Says John Hammond, at Data Resources Inc., the increases ``are coming on the eve'' of a slowdown in demand for 1985 and the possibility that import restraints might be lifted from Japanese cars. In the face of either of these possibilities, Detroit would have to be more competitive than ever.
``It's interesting that General Motors would lead the way in pricing at a time of record profits just three months before'' Japanese restrictions come up for review, says Thomas O'Grady, an auto expert at Chase Econometrics.
General Motors would like to show Washington that the industry is strong enough to hold its own, Mr. O'Grady says, and that restrictions should come off. It wants to be able to increase the number of subcompacts it imports from Japan and sells under its own name. It can't do that unless the limits are relaxed. Chrysler opposes such a move.
The domestic automakers last increased prices for all 1985 models just four months ago, when General Motors came out with a 2.3 percent increase, Ford a 1.3 percent rise, and Chrysler a 1.7 percent hike.
Since the start of the 1984 model year, Mr. Hammond says, overall prices have risen by about 7 percent.
``Consumers may not notice 3 or 5 percent increases this year, because they didn't buy a car last year and another one this year,'' says Mr. O'Grady. ``They compare to the last time they bought a car, and those increases end up being quite large.''
Interest rates have been falling over the last several months, but that doesn't take the bite out of financing a more expensive new car. Auto loan rates haven't changed and still hang at 13.5 to 14 percent, according to GMAC, the financing arm of General Motors.
But incentives, even now, are not completely extinct, especially for the small-car market, which has been languishing. Even though American Motors is upping the Jeeps, it won't take back a price cut on its Alliance and Encore models.
In December, to reduce its inventory, AMC rolled back those prices by 1.6 percent, or $107.