On average, new car buyers paid $48,397 in September. That’s a 0.4% decrease year over year, and down about $250 since June.
Manufacturer incentive spending rose from 4.8% of the average transaction price a year ago to 7.3% in September, according to data from Kelley Blue Book’s parent company, Cox Automotive.
Why Are Prices Falling?
Average transaction prices (ATP) fell, in part, due to increased sales of smaller, cheaper cars. The Chevrolet Trax, Honda CR-V, Hyundai Elantra, as well as the Toyota RAV4 and Corolla are selling strongly. The Corolla, Elantra, and Trax all have ATPs in the $25,000 range, while the CR-V and RAV4 commonly transact below $40,000.
“One reason transaction prices are lower in 2024 is that many buyers are choosing smaller, less expensive vehicles,” noted Cox Automotive Senior Economist Charlie Chesbrough. “The subcompact and compact SUV segments are outperforming the market this year, and by no coincidence, they’re also two of the lowest-priced product segments in the market.”
EVs Also Contributing
Another factor in September’s lower ATPs is retraction in the EV market. The ATP for EVs is $56,531, but that figure is still 0.9% lower compared with year-ago results.
Likewise, the premium EVs command compared to the rest of the market is down. The ATP premium for EVs fell from 19% on average through the end of Q3 to 16% in September.
Incentives on EVs fell 0.7% compared to August but remain at $6,904, or 12.3% of EV ATP.
New Vehicle Supply Rising, Political Concerns
Higher dealer inventory levels have also put pressure on prices. A year ago, 2.07 million new vehicles were available at dealerships, and at the start of September, 2.84 million new vehicles were on lots.
Not all brands face the same inventory issues, however. Some brands have too much inventory — Ford, Chrysler, Cadillac, Volvo, and Dodge, for example. Other carmakers have too little, or at least less than industry averages. Brands with less-than-typical inventory include Lexus, Toyota, Honda, Subaru, Tesla, and Kia.
With another month to go before the U.S. elections, many buyers are holding off, meaning demand is possibly somewhat lower than normal.
Interest rates, economic outcomes, and electrification incentives are all tied to the outcome of the U.S. elections, too. These factors will have further influence on new car availability and pricing.