One of the ongoing conversations in the nerdier corner of the automotive industry is how misleading Average Transaction Price (ATP) is when trying to understand affordability. The number going up is bad, sure, but it’s as much a reflection of what people are buying as it is what things cost. ATP is above $50,000 again, and while that’s not great, the fact that the number is growing slowly is a sign.
The Morning Dump today will explore what I call downclassing, which is a term I’ve just made up for when buyers opt for a vehicle one class lower than what they want or currently have. With tariffs, higher fuel prices, and inflation, it’s felt like something has to give, and I think this is the first clear sign that something is giving. You know what’s also giving? The bottle caps on tire sealant kits in some Hondas, which is annoying because this was already the subject of a recall.
Penske is one of the largest dealer groups in the United States and a public company. One of those two statements will likely not be true by this time next year. What will always be true is that I will probably politely decline your helicopter ride, even if it’s a Lexus helicopter.
The Era Of Downclassing
This chart from Cox/KBB shows that ATP hit $50,562 in September, which is juuuuust shy of the all-time record. A lot of this increase has been driven by tariffs and trimflation, but also by consumer preference. What a normal person might pay for a car is closer to the Keating Line, which is around $35,000.
While that number is going up, it’s only going up a little. Normally, ATP rises a lot this time of year as cars from the next model year (in this instance, 2027 cars) start to show up on dealership lots. For the last few years, the year-over-year increase is 2%-4%. The September ATP was only up 1% year-over-year.
What’s happening?
“What’s keeping the overall average transaction price increase relatively modest is mix,” said Cox Executive Analyst Erin Keating. “Affordability pressures are pushing more buyers toward lower-priced vehicles and segments, which tempers the industrywide number even as prices for individual vehicles rise.”
Downclassing! This showed up earlier in Cox’s Q3 sales forecast. Look at this:
A lot of consumers can’t stretch a payment beyond 80 months and are looking to the middle. Instead of a luxury midsize SUV like a Lexus GX, for instance, a consumer might pick a higher trim Grand Highlander Hybrid. Instead of a Lariat F-150, a nicer Ford Ranger Tremor might be good enough.
The way downclassing is going to show up is in product mix, as you can see above, as well as in lower increases in ATP. If you break down how pricing works for major automakers, you’ll also see the luxury brands down relative to mainstream alternatives. Toyota, for instance, saw ATP rise 4.9% year-over-year in September. Lexus? ATP was only up 2.3%. Genesis has seen an ATP drop this year of 0.1%, compared to a rise of 0.7% at Kia. This isn’t universal, and the fact that September of 2025 was the last month of the EV tax credit is going to throw off the numbers a bit (Cadillac ATP is up, Chevrolet ATP is down).
It’s sort of the last lever shoppers have to pull when it comes to buying a new car, and they seem to be pulling it.
Honda Is Hitting The Bottle Again
One of the choices Honda made when building my CR-V that I don’t love is they replaced the spare tire with a tire inflation kit. If I have a tire go down and I can’t patch it, this means I’ve got to replace the tire and the little air cylinder, which is about $30-$40 shipped.
Of course, Honda last replaced my air cylinder for free because it was under a recall due to a leaky cylinder cap. Some of those same cars are being recalled. Why? Here’s NHTSA:
During preparation of countermeasure parts for the remedy of NHTSA Recall ID 26V-366, the supplier did not implement adequate change-point management which resulted in the absence of appropriate disposal controls for pre-countermeasure parts, allowing those parts to be mixed with countermeasure parts in the supplier’s warehouse. Subsequently, the supplier incorrectly shipped pre-countermeasure parts, resulting in affected vehicles being equipped with tire repair kits containing pre-countermeasure components.
What this means is that the supplier sent out the faulty bottles as a replacement to some consumers. So far, it doesn’t look like I’m one of them.
Penske Goes Private
Penske Automotive Group just made a $16.3 billion deal to take itself private, according to Bloomberg:
Motown Acquisition Corp., an entity jointly owned by Penske Corp. and Mitsui & Co., will acquire the dealer group for $212 a share, an 8.8% premium over the stock’s prior closing price, according to a statement Thursday. The deal, which is expected to close in the first quarter of 2027, is not subject to a financing condition.
Penske Corp., the closely held transportation-services company founded by Roger Penske — the former race-car driver who also leads Penske Automotive — and Mitsui proposed the take-private deal to the dealer group’s board in July. Penske Corp. and Mitsui collectively own about 72% of Penske Automotive’s outstanding common stock, according to data compiled by Bloomberg.
Penske has about 150 dealers in the United States, as well as dealers across the globe.
Lexus Has Started Its Helicopter Service
I enjoy helicopters and will always crawl around one if there’s an exhibit at a museum. Flying in them? I’ll do it, but I may not be happy about it.
If you’re in Japan, though, you can take a Lexus Helicopter or a Lexus Yacht:
Together with Aero Toyota, Lexus is reimagining the journey as a personal and memorable experience, from chauffeur service to the heliport to the flight to a city or resort and even time on the water aboard the LY680. Mobility is transformed from simply a means of reaching a destination into an experience that enriches the customer’s lifestyle.
The helicopter is a seven-seat Leonardo AW169 manufactured by Agusta and customised with a bespoke cabin that reflects Lexus’s luxury and attention to detail. In-flight facilities include Wi-Fi and a tablet system for controlling cabin climate, lighting, entertainment and a live feed of views from an external camera.
I’m good.
What I’m Listening To While Writing TMD
It feels like a Future Islands doing “Seasons (Waiting On You)” kind of day, right?
The Big Question
What’s the best downclassing you could do right now and save a little money?
Top photo: Lexus/Toyota/DepositPhotos.com
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