The average price that Americans pay for new vehicles has climbed steadily – and disconcertingly for many consumers.
But last month, something noteworthy happened: A trend was broken when the average amount paid for a new vehicle fell below the sticker price for the first time in 20 months, according to Kelley Blue Book tracking data.
Moreover, the average transaction price of a new vehicle in the U.S. declined in March to $48,008, a month-over-month decrease of 1.1% ($550).
Even so, transaction prices remained up 3.8% ($1,784) compared to year-ago levels.
Kelley calculates new-vehicle ATPs have been above the average base price for 20 months. That streak ended in March, as the average price consumers paid fell to $171 below the average sticker.
In comparison, in March of last year, the average transaction price was nearly $1,000 over sticker price, as consumers faced a seller’s market with thin vehicle inventories because automakers cut production amid a worldwide microchip shortage.
Years ago, dealers collected base price or above for only the hottest vehicles. Most vehicles sold for thousands of dollars below the sticker price as supply often outpaced demand.
Last month’s drop in average price transactions comes as no shock, says Rebecca Rydzewski, research manager-economic and industry insights for Cox Automotive.
“We’ve been anticipating transaction price declines as inventory has steadily improved and choice has expanded,” she says. “More vehicles on dealer lots – and on their competitors’ lots – means dealers simply don’t have the pricing power they did six months ago.”
The average price paid for a new non-luxury vehicle in March was $44,182, a decline of $505 compared with February.
Most non-luxury brands – including Chevrolet, Chrysler, Dodge, Ford, Hyundai, Kia, Nissan and Volkswagen – saw ATP declines of between 0.2% and 3.8% month-over-month.
Honda and Kia show the most price strength in the non-luxury market, transacting between 3% and 6% over sticker price in March.
Strong luxury-vehicle sales have largely driven the overall elevated new-vehicle prices of late.
Two luxury brands now have average transaction prices over $100,000: Land Rover and Porsche. (Ultra-luxury brands such as Ferrari and Rolls-Royce aren’t included in the Kelley data.)
While automakers’ incentive spending remains historically low, customer incentives averaged $1,516 in March, increasing to 3.2% of the average transaction price compared to 3% in February.
In contrast, Kelley estimates incentives averaged 8.4% of ATP two years ago.
“Incentives and inventory tend to move in tandem – when one moves up, so does the other,” says Rydzewski. “Right now, in-market consumers are finding more inventory, more choice, and dealers more willing to deal, at least with some brands.”
But, she adds, although the deals are improving, auto-loan rates remain relatively high, “ultimately making new-vehicle affordability an issue for many households.”
