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Rising car prices stir some concerns

DETROIT - The average price for a new car in the United States is edging toward $30,000, as automakers remain stingy with discounts and there are just not enough of the most popular vehicles available.

DETROIT - The average price for a new car in the United States is edging toward $30,000, as automakers remain stingy with discounts and there are just not enough of the most popular vehicles available.

Although the average price remains below historic highs when adjusted for inflation, nominally it has never been so high, according to the auto-research site That concerns some car-company executives, who fear that the industry's recent comeback could be stalled if buyers start experiencing sticker shock.

"You've got to figure out that sweet spot where you offer just enough incentives to get people to buy your cars without sacrificing profitability," said Jesse Toprak, vice president of industry trends at TrueCar.

Several factors account for the rising prices. Because there are more new models on the market than in recent years, automakers need fewer incentives to lure consumers into the showrooms. The earthquake in Japan has also caused shortages of some cars and crossover vehicles built there by Toyota, Honda, and Nissan, which have driven up the prices on the limited inventory in stock.

Car companies are also commanding better prices for their small cars because of added features such as entertainment systems and heated seats. Consumers are increasingly paying more to get upscale options on smaller cars that were once primarily bare-bones purchases.

"On a dollar basis, they're paying more, but they're getting a whole lot more car than in the past," Toprak said.

The average transaction price for a new vehicle in the United States, including rebates and other incentives, reached $29,583 in April, according to That figure represented an increase of $305 over March. But automakers are not necessarily getting greedy, industry analysts said. Some of the increases are going toward covering higher material costs, and the companies are also taking advantage of strong demand.

General Motors, for example, is running short on supplies of its Chevrolet Cruze compact car, and Ford Motor Co. is low on inventories of its Focus sedan and Explorer SUV. Some of the biggest year-over-year price increases are found on revamped, hot-selling models such as Chrysler's Jeep Grand Cherokee and Honda's Odyssey minivan.

"The pricing is more of a symptom of lack of supply than anything else," said Jim Farley, Ford's head of global sales marketing. "But it is affecting the industry's volumes."

Ford and Toyota announced across-the-board price increases this year on their 2011 models. Ford said it would raise prices by an average of $117, or 0.4 percent, while Toyota said it would lift prices by about 1.7 percent on many of its Toyota, Lexus, and Scion models. GM has said it will charge more for many of its vehicles, by an average of $123.

But the increases are only part of the equation. Overall discounts and sales incentives fell to their lowest levels in five years in April, according to the automotive site

Incentives averaged about $2,320 per vehicle in April, a $370 reduction from the period a year earlier. Some of the reduction is attributed to sales programs that expired and were not renewed. Japanese carmakers have also pulled back incentives because of the earthquake-related shortages, and the U.S. companies have followed suit.

"Our incentive strategy is based on the competitive environment," Farley said. "There's been a drastic change because stocks have been depleted and we're launching a lot of new products that don't require incentives to sell."

Automakers always try to balance the need for incentives against consumers' demand. But if companies pull back too far on discounts, some potential shoppers will simply wait until the next deals are announced.

U.S. automakers are not as reliant on heavy incentives as in years past, mostly because the companies closed dozens of factories to bring their production into better balance with their market shares. They also have little reason to pile on discounts when their Japanese competitors have cut incentives so drastically.