GOOD News!  New Vehicle Prices Are Falling

Great news to share if you're a car shopper. New vehicle prices are falling according to the latest data shared from Kelley Blue Book.  Researchers say March broke a nearly two-year trend when the average price of a new vehicle fell below the manufacturer's suggested retail price (MSRP) for the first time in 20 months.

New Vehicle Prices Falling

Here a look at the KBB data:

• The average transaction price (ATP) of a new vehicle in the United States declined in March 2023 to $48,008, a month-over-month decrease of 1.1% ($550) from a downwardly revised February reading of $48,558.
• March 2023 transaction prices remained up 3.8% ($1,784) compared to year-ago levels. Meanwhile, auto manufacturer's incentive spend rose to the highest level in 11 months at 3.3% of the ATP in March 2023, averaging $1,516.

Kelley Blue Book says that according to its calculations, new-vehicle ATPs have been above the average MSRP for 20 months until the trend changed last month.. In March 2023:

• Transaction prices continued to trend downward and the average price consumers paid fell to $171 below the average sticker.
• For comparison, a year ago in March 2022, the average ATP was nearly $1,000 over MSRP. Sales volumes were up month over month by 20% and up 8% year over year in March 2023. KBB says that's thanks partly to improved supply, a better mix of lower-priced models and strong fleet sales.

"The latest transaction data from March reveals new-vehicle prices continued a downward trend through the first quarter of 2023," said Rebecca Rydzewski, research manager of economic and industry insights for Cox Automotive. "Both luxury and non-luxury prices were down month over month. We've been anticipating transaction price declines, as inventory has been steadily improving and choice has expanded. More vehicles on dealer lots – and on their competitors' lots – means dealers simply don't have the pricing power they did six months ago."

Average Prices for Non-Luxury Cars Decline

Non-luxury car buyers saw lower ATP's and higher incentives in March. KBB data shows that average price paid for a new non-luxury vehicle in March 2023 was $44,182, a drop of $505 compared to February 2023. Most non-luxury brands – including Chevrolet, Chrysler, Dodge, Ford, Hyundai, Kia, Nissan and Volkswagen – saw ATP declines between 0.2% to 3.8% month over month in March. Higher incentives helped to push prices down. Honda and Kia were the brands that showed the most price strength in the non-luxury market, transacting between 3% and 6% over sticker price in March.

Luxury Share Stays High While Average Prices Fall Slightly  

 
As usual, strong luxury vehicle sales have been a primary reason for overall elevated new-vehicle prices. This trend continued in March 2023 when luxury vehicle share hit 18.2% of total sales, though that number is down slightly from a high of 19.5% in February 2023. KBB says  KBB says the high share of luxury sales continues to push overall industry ATP higher, even though the luxury ATP has declined month over month. For comparison, in March 2018, the luxury share was 14.0% of the market.  Two luxury brands now have average transaction prices over $100,000 – Land Rover and Porsche.  (Note: Kelley Blue Book data presented does not include exotic brands such as Ferrari and Rolls Royce.)

All this said, car buyers continue to pay over MSRP for new luxury vehicles. In March 2023, the average luxury buyer paid $65,202 for a new vehicle, down just $9 from February 2023.  Luxury vehicle ATPs were a mixed bag in March, with entry-level luxury cars, high-end luxury cars, luxury compact SUVs, luxury mid-size SUVs and luxury subcompact SUVs all showing price declines between 0.5% and 1.4%. Luxury cars and luxury full-size SUVs saw price increases between 0.8% and 1.6%.

EV Prices Increased Slightly 

While the overall new vehicle pricing is trending downward, the same can't be said for electric vehicles. Those prices increased slightly. KBB reports that the average price paid for a new EV increased by $313 (up 0.5%) in March 2023 compared to February 2023. The average new EV sold for $58,940 in March, according to KBB estimates, which still is well above the industry average. New EV pricing peaked in 2022, coming Down steadily since Q3 of last year.

Still,  researchers call the higher EV prices in March a surprise, considering Tesla, the automaker with the largest share of EV sales, has cut prices three times in recent months.  But then again, EV sales from Mercedes, Rivian, Lucid and other brands have increased at the same time,  so that's likely offset lower-priced Tesla products.

Auto Incentives Remain at Historically Low Levels but are Trending Upward

Turning to incentives, they are on the increase. In March, KBB says they averaged $1,516, increasing to 3.2% of the average transaction price compared to 3.0% in February 2023.  Still, incentives remain at a historically low level.  In March 2021, Kelley Blue Book estimates incentives averaged 8.4% of ATP.  In March 2023, Luxury cars had the highest incentives in at 6.7% of ATP. Meanwhile, vans had the lowest incentives at less than 1% of ATP.

"Incentives and inventory tend to move in tandem – when one moves up, so does the other," said Rydzewski. "Right now, in-market consumers are finding more inventory, more choice, and dealers more willing to deal, at least with some brands. Yet, even as deals improve, unfortunately auto loan rates remain very high, ultimately making new-vehicle affordability an issue for many households."

For a closer look at the data click here.

Photo Credit: Ground Picture/Shutterstock.com.