Entry-level Market Shrinks

If you’ve noticed a lack of entry-level vehicles for purchase, it isn’t your imagination. Between 1995 and 2001, the proportion of car buyers earning less than $45,000 a year buying new vehicles dropped 9 percent while the share of new vehicle sales by typical luxury buyers (income of more than $75,000) has risen 16 percent. According to an analysis by General Motors, there has been a shift in the new vehicle buyer to the upper third of the population.

Even though new car prices have fallen 2.2 percent, and incentives have been generous, the average transaction price of vehicles sold is still $26,000. Ten years ago, the average transaction price was $20,000. In the last year, the average income of people buying new cars has been between $61,000 and $63,000. In May of 2002, it rose to $67,000, and in June, to more than $70,000.

Consequently, auto manufacturers have switched their emphasis to certified used vehicles. Backed by a limited manufacturer warranty, certified used vehicles generally have fewer miles and aren’t older than a few years. Because the term "certified" is not regulated, says Art Spinella of CNW Marketing/Research, each manufacturer has its own criteria.

For the first eight months of 2002, according to Ward’s AutoInfoBank, nearly 250,000 more Ford F-Series pickups were sold through August, base price $18,240, than Toyota Camrys, base price $20,310. Among traditional brands, BMW AG’s sales through August rose 16.8 percent. GM’s Cadillac sales are up 6.1 percent from last year, and Lexus’ have increased 15.9 percent.