CNBC's Phil LeBeau joins 'Power Lunch' to discuss what's behind rising auto prices.

Recent data reveals that auto sales are continuing to rise despite significant increases in vehicle prices. The market has seen a notable shift towards higher-end vehicles, with nearly half of all cars now selling for over $50,000 and more than a quarter exceeding $60,000. This trend began during the semiconductor shortage, when automakers prioritized the production of their most profitable models due to limited supply.

Industry experts note that there is little expectation for prices to decrease, with factors such as tariffs and ongoing demand from higher-income households contributing to sustained high prices. The average transaction price for vehicles is now just under $49,000, and lower-priced options have become increasingly rare in the market.

Auto sales rise amid higher prices

All right, welcome back. On Friday, we talked about how expensive SUVs like the Jeep Grand Wagoneer and others have gotten. I posted some of the prices on X. I put, yes or no, would you buy one of these cars? As of right now, 1.1 million of you have looked at that tweet and got a lot of feedback. A lot of you were also upset by how expensive some cars have gotten. Not just that, but really all of them. But guess what? It doesn't seem to really matter. Phil LeBeau rejoining us now with some new data that you had promised us on Friday. And it's eye-opening, Phil. Well, the fact of the matter is, Brian, auto prices continue to move higher. And it's the upper end of the market where you're seeing the most growth. Cox Automotive has pulled this data for us. And this is just a stark snapshot of just how much prices have increased and the willingness of the buyer out there to buy these vehicles. You go back to 2019, now that's the average transaction price. Let's call up the full screen that shows the cost of vehicles. Over $50,000, over $60,000, and over $70,000. If you, there it is. Now, if you look at this data here, look at 2019, Brian, and compare that with today. One out of every four, more than one out of every four vehicles sells for over $60,000. Almost half go for over $50,000. That's the reason why you look at the previous chart, average transaction price is close to an all-time high at just under $49,000. Brian, this started during the chip crisis. When the automakers were restricted with how many semiconductors they could get, what did they do? Well, they're smart business people. They prioritized making the most profitable vehicles, the highest priced vehicles, higher end vehicles, and they sold, mainly because there was limited supply out there. And that was the beginning of the shift within the market. I know people will sit there and say, it's ridiculous. There should be more vehicles for under 40,000, under 30,000, forget about under 20,000. That doesn't happen anymore. And the reality is the automakers are in the business to make money. And this market, because of higher income households buying a greater percentage of the vehicles has shifted to the upper end. Like it or not, that's the reality if you look at the numbers. Yeah, listen, I don't blame the car companies for doing it, Phil. Like you said, they had pricing power during COVID. People got, you know, interest rates were low. PPP money was flowing. Everybody wanted a car. Prices are not going to come back down. Is that a fair statement? They're not, they're not, they might with incentives here and there. I get it. Car's not selling. Here's $5,000 cash back. Generally speaking, they're not going to go back down. There's no expectation within the industry that auto prices will drop. If anything, the expectation is that they will continue to edge higher because we still don't know exactly what the tariff outlook is going to be when it comes to Mexico and Canada. That has a far bigger impact than Europe tariffs for the autos. Korea and Japan are huge because those are big markets in terms of exports to the U.S., but it's Canada and Mexico that really have, especially Mexico, have an outsized influence in terms of cost of vehicles. And there are some offsets with USMCA and domestic production, but we're still waiting to see where they finally settle out. It is. Driving in the suburbs, Chicago, here in New Jersey, areas like that, DC, just shocking how many like $130,000 SUVs you see driving around. Philibeau, really appreciate it. Thank you.

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