New vehicle prices remained high, even though the average new car price dipped below the MSRP in March. According to a new report from Cox Automotivethe average vehicle transaction price is still higher than last year, even though new car prices are below the MSRP for the first time in 20 months.
In March, the average transaction price of a new car in the US fell to $48,008, a month-over-month decrease of around $550 or 1.1% from February’s ATP of $48,558. With transaction prices down, we’re also seeing an increase in incentive spending from manufacturers with an average of about $1,516. This is a 3.2% increase in incentive spend and the highest we’ve seen in the automotive market in a year.
Recent data from Kelley Blue Book shows that new car ATPs have been above average sticker price since July 2021. March 2022 numbers show the average ATP was almost $1,000 over MSRP last year. This March, however, the trend of paying more than the sticker for a new car finally broke, and consumers paid an average of $171 below the MSRP.
This change is in part due to an improved supply of vehicles, as the chip shortage and supply chain issues of the past two years lessen. Sales were up for new cars by 20% month over month in March, and up 8% compared to March 2022.
Since supply is improving all over the automotive world, some things are starting to look more like normal, but dealer incentives, though up, are still slow to return. Incentive spend by manufacturers is at historically low levels, even though the average incentive did grow from February by two-tenths of a point.
“Incentives and inventory tend to move in tandem – when one moves up, so does the other,” Rebecca Rydzewski, research manager of economic and industry insights for Cox Automotive said. “Right now, in-market consumers are finding more inventory, more choices, and dealers are more willing to deal, at least with some brands. Yet, even as deals improve, lamentably, auto loan rates remain very high, ultimately making new-vehicle affordability an issue for many households.”
Luckily, the trend on the average price paid for a non-luxury vehicle declined in March to $44,182, a $505 decline from February. Brands such as Chevy, Dodge, Ford, Chrysler, Hyundai, Nissan, and VW saw month-over-month declines between 0.2% and 3.8%. This aligns with higher incentives bringing prices down. Honda and Kia are currently showing the most price strength, with transaction prices ranging from 3% to 6% over sticker.
The luxury vehicle market saw a month-over-month drop of just $9 in the average transaction price, but buyers are still paying over MSRP here, with an average new vehicle cost of $65,202.
Even though it can be hard to combat rising auto loan prices, these trends from KBB data show that things may be turning around. Only time will tell how far prices will fall, or how quickly incentive spending may increase. When shoppers continue to purchase vehicles at or above MSRP it signals that the population is willing to pay the prices being offered, and fewer deals ultimately emerge.
Pictured: 2023 Honda HR-V (Top), 2023 Ford Expedition (Middle)
Sources: Cox Automotive
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