Trivia about car prices
- The average new car transaction value in October 2023 increased by about 21% compared to the same month three years ago, when there was no end in sight to the pandemic.
- However, the average transaction price has remained flat compared to the previous year. Electric car prices are down about $13,000 from a year ago.
- Manufacturer incentives averaged about $2,400 in October.
- It’s easy to find a new Dodge, Chrysler, Ram, or Jeep, but it doesn’t necessarily have to be a Toyota, Honda, Kia, or Subaru.
Over the past few years, car buyers have become accustomed to paying more than the manufacturer’s suggested retail price (MSRP). They saw car prices steadily rise with no end in sight. This leaves many shoppers scratching their heads, and the number one question we get asked by experts is, “When will new car prices drop?”
It can be said that inflation in new car prices has almost disappeared this year. On the surface, that’s great news. However, car prices have risen sharply over the past three years. Now, the recent United Auto Workers union strike is once again threatening inventory and prices.
In this story, we’ll explain how to navigate your car purchase so you can get the best information from our experts if you’re considering buying a car. We dig deeper to answer concerns about falling car prices.
What influences the price of a new car?
The average new vehicle transaction price (ATP) was $47,936 in October, unchanged from the previous month, according to Kelley Blue Book data. New vehicle transaction prices have fallen more than 3.5% since the beginning of the year, as downward pressure in the market continues to favor buyers, according to analysts at Cox Automotive.
“October new car prices were about the same as September,” said Rebecca Ryzewski, research manager at Cox Automotive, parent company of Kelley Blue Book. “Tesla is the only company that has moved significantly in the last month, and continues to change its prices at an alarming pace. In fact, Tesla’s price movements in 2023 demonstrate how dynamic pricing is possible in the direct-to-consumer model. is showing.”
Manufacturer incentives increased to an average of $2,400 in October, but have remained largely unchanged over the past three months. More on that later.
Average transaction prices are still approximately 20% higher than in October 2020 as the realities of the COVID-19 pandemic set in. The average transaction price for a new car at that time was $39,739.
Vehicle price breakdown
- Non-luxury car price: The average transaction price paid by car buyers in October was $44,331. Overall, prices have remained stable since January.
- luxury car prices: The average transaction price for luxury cars was $62,903. Luxury cars account for about 19% of all car sales. Luxury goods prices fell nearly 7.4% compared to the previous year.
- electric car prices: The average transaction value for a new electric vehicle was $51,762, down from about $65,000 a year ago. The average transaction price for Tesla’s Model X fell 23% compared to October 2022. The average price of an EV is down about $13,000 compared to last year.
The following factors typically affect new car prices:
- Stock status
- Manufacturer incentives
- dealer discount
- Trade-in vehicle price
All four of these factors have experienced significant disruption over the past few years.
New car inventory updated
Dealers measure the inventory of new cars they sell on a basis called “days on stock.” This represents how long it would take for a new car to be sold out at the current sales pace if the car manufacturer stopped making new cars. Last year, inventory was down to just one week. By early October, inventory for many brands was up 62% year over year. However, some automakers such as Toyota, Honda, and Kia are unable to fulfill car orders due to lack of inventory.
Ahead of the recently ended United Auto Workers union strike, domestic brands began adding surplus vehicles to their inventories. In contrast, in the midst of the pandemic and global microchip shortage, inventories have fallen to record lows. Without enough of the critical microchips that control everything from engine timing to navigation systems, automakers can’t build cars as quickly as they want. Even though auto inventories are near normal, chip shortages continue for some automakers and certain models.
“Although the average number of contracts per day is increasing, backorders are also increasing due to production shortages,” Kia Motors said in a recent conference call.
Last year, manufacturers like Ford began reviewing their long-term inventories even as the chip shortage eased.
Which car manufacturer has the most vehicles?
Cox Automotive analyzed data from vAuto, its new and used car dealership management software, and found that brands such as Dodge, Chrysler, Ram, Jeep, Lincoln, Infiniti, Buick, and Genesis offer extensive new car inventory. I understand. In contrast, inventory levels at Toyota, Honda, Kia, Subaru, Cadillac, BMW, Lexus and Land Rover remain well below normal.
Related: Is Now the Time to Buy, Sell or Trade in a Car?
Overall, the auto industry had 67 days’ worth of vehicles in stock at the beginning of November. This is considered normal inventory supply by historical standards and is also the highest level since early spring 2021. Still, automakers had 86 days of healthy vehicles in stock in the summer of 2019, before the pandemic.
Vehicle incentives are stable
Automakers used more incentives to attract buyers than at any point in the past two years. October was no different. Automakers spent 4.9% of the average transaction price on incentives to move vehicles, according to analysts at Kelley Blue Book. Incentives averaged about $2,400. Still, these are considered historically low compared to fall 2020, when incentives were around 20% of the average transaction price.
When automakers have an excess supply of cars, they sell them to dealers at a discount. Over the past few years, automakers and dealers have been less aggressive with the cars they sell and have offered few discounts. Now, with interest rates on auto loans rising, supply is increasing again.
According to our analysis, the luxury car segment offered the highest incentives throughout most of 2023. However, that trend reversed in October. Non-luxury car incentives were 4.9% and luxury car incentives were 4.6%.
Find the best trade-in offer
Trade-in value is another factor that affects a car’s price. A lack of used car inventory has driven up prices, leading to the widespread belief that buying a new car is cheaper than buying a newer model used car. In that sense, it’s the perfect time to trade in your car. Automakers cut production for several years after the 2008 recession. That’s why it’s now especially difficult to find cars with high mileage and older cars for sale for less than his $20,000.
The dealer will evaluate your trade-in value based on the inventory needed. You’re more likely to offer buyers a good deal on a car that fewer people are currently looking for. Car dealers have an oversupply of relatively expensive used cars.
In other words, a consumer trading in a 2018 Honda Civic will be much more satisfied with their trade-in appraisal than a consumer trading in a 2021 Jeep Grand Cherokee.
Shoppers should also be prepared to buy trade-ins. It’s a bit complicated to do, but it might make sense to sell your old car to one dealer and buy a new car from another if the final invoice figure is more reasonable. yeah. Use the Kelley Blue Book Instant Cash Offer tool to buy your trade-in vehicle at your local dealer. Once you receive your offers, you can choose the trade-in offer that best fits your situation.
pro tips: While I was at the dealership recently trying to close a deal on a subcompact SUV, I used the Instant Cash Offer tool to see what I could get for my family car. Offers of up to $50,000 started pouring in for his 2021 Ford F-150 Lariat with a hybrid powertrain, which he has a low mileage of 13,000 miles and no accident history. The dealer I was trying to sign with offered me $43,412. The Kelley Blue Book price was his $50,196, so I tried to leverage other offers, but the dealer wouldn’t budge. So I left that dealership with a low offer and went to another dealer with the highest offer.
New car prices continue to fall
So when will new car prices drop? Prices have started to drop for some brands and some retailers. For other brands like Toyota, Honda, and Kia, shoppers should look for harder-to-find models and be prepared to pay more. In recent months, cars and SUVs such as the new Toyota Grand Highlander, Honda CR-V and its hybrid version, Toyota Camry, Toyota Corolla, Honda Civic, and Toyota RAV4 have become hard to come by.
The UAW strike is over, but some vehicles continue to be affected by six weeks of labor protests. GM’s Chevrolet and Cadillac brands were most vulnerable due to the early UAW strikes. Supply is especially tight for the Cadillac Escalade, Chevrolet Suburban, Chevrolet Tahoe, and Chevrolet Trax. Truck manufacturers had pickup trucks in stock ahead of the UAW strike, but some, including the newly redesigned Chevrolet Colorado, are in short supply.
The strike is also impacting Ford, due to a shortage of Ranger and Bronco models.
Some vehicles are still sold at markup prices
Some automakers and dealers with large inventories are offering incentives, but some are still running low on inventory. This means some dealers are still raising prices on some vehicles.
According to Markups.org, some Honda, Toyota, Ford, and Kia models are selling for more than the manufacturer’s suggested retail price in places like California, Florida, and Michigan. In Georgia, this is his Hyundai Tucson marked up at an Atlanta area dealership.
pro tips: Since I recently bought a car, I noticed that the price increases are different at dealerships that sell cars like Kia and Hyundai. One dealer charged $599 and another $699. Another called them “physician fees.” Before you shop, understand how much your state’s vehicle tax, tag, and title filing fees are before you buy a car. These are pure markups or profit centers for dealers. Another markup on your bill might say “paint and fabric protection” or “window tinting.” If you really want to sell your car, it’s wise to ask the salesperson to waive these fees before you sign anything.
What to expect: Future prospects
But what if you really want a popular car that is in short supply? Now it’s time to test your patience. Past Federal Reserve interest rate hikes used to control inflation still make it difficult for consumers to buy cars. According to a study by Cox Automotive, the typical new car loan interest rate rose to 10.55% for a 72-month loan. That’s a new high. As a result of these changes, the estimated standard monthly payment has increased to $767. Good news? The average monthly payment reached $795 in December 2022. This means car affordability is improving, albeit slowly. Additionally, slowing inflation leaves open the possibility of rate cuts in the near future.
For now, car buyers need to remain flexible. It is also possible to purchase a new car at a low price. It might not be the car you were thinking of buying. Or maybe you need to head to a small town outside of a big city where there’s less competition.
Editor’s note: This article has been updated for accuracy since it was first published. Sean Tucker contributed to this report.