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Auto Pricing Begins to Lift Its Head Off the Floor

Here and there, automakers are quietly raising prices, the surest sign yet that demand has bottomed out and begun to recover.

For instance, BMW last week hiked U.S. prices on BMW cars and trucks an average of 0.4 percent. That works out to only a couple of hundred dollars on a $60,000 luxury car, so the money is no big deal, but it shows BMW's determination to command a premium price, even in a challenging market. In addition, BMW increased its destination and handling charge, which is applied to every car and truck, by $50 to $875.

Separately, General Motors disclosed in a recent presentation to reporters and analysts that some of its new models like the Buick Lacrosse are selling for thousands of dollars more than the models they replaced.

It isn't so much sticker prices that have changed. The net effect of price hikes is more likely to be felt in the form of lower discounts in the form of rebates and incentives.

According to, incentives are down from year-ago levels for most major automakers, even though on average, there was an uptick from October 2009 to November 2009.

The auto shopping web site said for instance that Ford (F) spent an average of $3,124 per vehicle on incentives in November 2009, down from $3,818 in the year-ago month.

GM was an exception to the rule in November, according to That's because GM is spending more on incentives overall because it is selling off inventory for discontinued brands like Saturn and Pontiac, said.

The closely watched Auto Affordability Index from Comerica Bank (CMA) probably bottomed out in the third quarter of 2009. The index measures how many weeks of the median household income are required to buy the average new vehicle. It hit a record-low 21.9 weeks in the third quarter, in part because of the government Cash for Clunkers incentive program.

Chart: Comerica

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