Cars and trucks are still expensive but a new report by Kelley Blue Book released Wednesday reveals the years-long rise in average transaction prices has slowed down considerably and sticker prices on electric vehicles have plummented.
The average price U.S. vehicle buyers paid in July was only 0.4% higher than it was in July, 2022, according to the report. That’s the smallest year-over-year price increase in a decade.
Specifically, the average transaction price for a new car in July was $48,334, a month-over-month decrease of $337 or 0.7% from June’s ATP of $48,671. That’s only a $199 increase from a year ago.
Since the start of 2023, transaction prices are down 2.7%, or $1,335, the largest January to July tumble in the past decade, according to the KBB report.
“New-vehicle price inflation has all but disappeared in 2023,” said Rebecca Rydzewski, research manager at Cox Automotive, KBB’s parent company in a statement. “New-vehicle prices, primarily driven by cuts in luxury and electric vehicles, are decreasing as inventory is steadily improving. With higher inventories and higher incentives helping to keep downward pressure on prices, there certainly are good reasons for shoppers to be heading back into the market.”
Indeed, with vehicle production steadily improving after shutdowns and slowdowns caused by the Covid-19 pandemic, supply chain issues and a global semiconductor shortage, dealer inventories are improving, leading to an increase in incentives from the automakers.
Their incentive spend increased for the tenth consecutive month in July to the highest level since October 2021, averaging $2,148, or 4.4% of the average transaction price, according to KBB. That’s just shy of twice the 2.8% of ATP incentives represented a year ago.
At the same time, led by deep discounting by market leader Tesla, the prices of battery electric vehicles took a nosedive last month.
The average transaction price for an EV in July was $53,469, down from $53,682 in June and down from more than $61,000 in January, KBB reported.
“The year-over-year decline of EV ATPs has been led by Tesla slashing prices on its popular models,” said Rydzewski in a statement. “Tesla prices are down nearly 20% versus a year ago, and other EV models, such as the Ford F-150 Lightning, have been following Tesla’s lead. While automakers report losing money on electric vehicles, they continue to aggressively pursue EV growth strategies.”
That squares with a report released last week by car buying and research site CarGurus.com.
In its July, 2023 Intelligence Report, prices for new EVs declined as much as 22% and 42% for used.
“If we think back to last year, it was right when concern about everything going on in Europe and gas prices were at its peak. So we saw massive increase in interest in EVs really pull down supply, shot up prices,” said CarGurus director of insights and analytics Kevin Roberts in an interview. “Now that we’re about a year in from that, not only have we started to see used vehicle prices come down, we’ve seen massive depreciations and used vehicle prices. Then you add in things like Tesla and Ford coming out with these price drops on their new variants as well. It’s really pulling down the prices on the used vehicles there. I mean, it’s pretty wild.”
Just as improving inventories have led automakers to return to offering incentives across their product lines, now EV customers are seeing deals with incentives at 6.7% of ATP, or $3,755, KBB reported.
At the end of July dealers had a 100 days’ supply of EVs on their lots while overall industry days’ supply stood at 54 according to KBB. Those numbers don’t include Tesla which doesn’t sell their vehicles through dealers.
As further evidence of vehicle prices starting to stabilize, KBB reported the ATP for non-luxury vehicles in July as $44,700, down $471 from June. Year over year, non-luxury prices increased by only 0.5%.
For luxury vehicles, prices in July dipped almost 3% year over year with the ATP at $63,552, down $192 from June, as average luxury prices have dropped more than 5% since the beginning of the year, according to KBB.
Yes, new cars and trucks are still expensive but at least the rate at which prices are rising, along with more generous incentives, just may be the difference in affordability for many consumers.
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