Car Prices Shift Into High Gear

NEW YORK (MainStreet) — Inflation is rearing its ugly head again as the travel-heavy summer months draw near.

The U.S. Inflation Calculator shows that the current rate of inflation, 3.2%, doubles the 1.5% inflation rate from mid-2010. But inflation poses a real threat to America’s new car market, where the average price of a Honda Civic, for example, has risen $1,600 since March, according to auto industry monitor Edmunds.com.

Part of the problem lies overseas, especially in Japan, where the economy there has taken a nosedive in the aftermath of the combined earthquake and tsunami that hit the country earlier this year.

“Production issues in Japan have already triggered price increases and incentive reductions across the board for all makes, both foreign and domestic,” says Edmunds.com CEO Jeremy Anwyl. “Prices are expected to climb even more this summer, creating a challenging environment for consumers in need of a new car.”

So how can consumers fight back? Edmunds offers these tips:

Don’t buy a new car this summer. Production lines in Japan should be back up and running in full capacity by the fall, which should bring the price of their vehicles down. Japan’s share of the U.S. auto market rose 27.3% in February 2011, according to the U.S. Dept. of Transportation. Toyota (StockQuote: TM) is the third-largest auto manufacturer in the U.S., behind General Motors (Stock Quote: GM) and Ford (StockQuote: F), so wherever Japanese auto makers go in terms of price, vehicles in the U.S. in general will follow.

Extend your lease (if you have one). Rather than close out a vehicle lease, see if you can extend it six months or so. That will buy you some time until new car prices become more reasonable.

Grab another consumer’s lease. Auto leasing sites like LeaseTrader.com match lease buyers up with lease sellers. If you can work out a good deal, you can finish another driver’s lease so you don’t have to pay top dollar for a new car.

If you buy a new car, make sure you get a bargain. You’ll need the patience of a saint, but if you look around and literally kick a lot of rubber tires, you may be able to jawbone your way to a less-expensive new car. To cut your search time, check out sites like Edmund’s “Deals of the Week” on new car and truck offers this summer.

Don’t bet on used cars. If you bypass a new car or truck in favor of a used one, you may be tripping over your own feet, financially. According to ADESA Analytical Services, the average price of a used car is at a four-year high, reaching $10,000 for 2011.

Buying a new car this summer is an expensive proposition, and if you’re on a tight budget, you may want to wait it out or just lease a vehicle instead. If not, hit the car dealerships with a good idea of what you want to spend, and stick to that number no matter what.

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