If you're a car shopper looking for some good news, we have it for you. The new-vehicle market continued to improve for car buyers in September. New vehicle prices continued to drop while incentive spending continued to increase, according to new Kelley Blue Book data. The downward trend in average transaction prices stems from several factors including higher inventory levels and lower market share for pricier vehicle segments.
According to KBB, in September, average transaction prices (ATPs) were down over 0.4% with an ATP at $48,397. KBB says downward price pressure continues to hold new-vehicle ATPs in check. At the same time, new-vehicle incentives in September were up for the third straight month. While they rose modestly compared to August, incentives reached 7.3% of transaction price, an increase from 4.8% in September 2023. KBB reports the average incentive package for a new vehicle was equal to 7.3% of the average transaction price ($3,522) in September, up from 7.2% in August and well above the 4.8% reported one year ago.
"New-vehicle transaction prices continue to be very steady this year, and higher incentive spending is helping maintain sales volume," said Cox Automotive Executive Analyst Erin Keating. "We still believe there is potential for growth in the market for the rest of the year, but with the uncertainty of a national election around the corner and major weather events disrupting business, maybe a slow, steady pace is all we should expect."
Despite lower new-vehicle ATPS and increasing incentives, new vehicles under $20K were still hard to come by in September. In fact, last month the Mitsubishi Mirage was the only new vehicle in the U.S. transacting for less than $20,000, according to KBB data.
KBB analysts say new-vehicle prices in the U.S. have held mostly steady this year through the end of the third quarter. Compared to January, when the average transaction price for a new vehicle was $48,369, prices in September were virtually unchanged, higher by less than $30. KBB says says a key driver of the downward price pressure is higher inventory levels. New-vehicle supply at the start of September was 2.84 million units across dealerships in the U.S., as measured by Cox Automotive's vAuto Live Market View, higher than the 2.61 million recorded in January and well above the 2.07 million a year earlier.
Mix of Smaller, More Affordable Vehicles Helps Hold Down Market Average Transaction Prices
While there was only one new vehicle in the U.S. - the Mirage - still transacting for under $20,000 in September, KBB says the overall mix of small, more affordable vehicles has been elevated for much of 2024, which is helping hold down the new-vehicle ATP. KBB points to mid-$20,000 priced vehicles such as the Chevrolet Trax (ATP: $25,081), Toyota Corolla (ATP: $25,535), and Hyundai Elantra (ATP: $25,902) as those that continue to sell at a strong pace. It also notes the Toyota RAV4 and Honda CR-V are also high-volume products – No. 3 and No. 5 on the best-selling list, respectively – that routinely transact for prices below $40,000, roughly 17% below the national average.
"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."
KBB says other pricier market segments are shrinking. Notably, the full-size pickup truck share is lower year over year in 2024. And since the ATP for a full-size pickup is north of $65,000, the lower share is helping pull industry-wide ATPs lower. KBB also notes the mid-size SUV sales are down through the third quarter versus the same period last year. Through Q3, KBB says ales of mid-size SUVs, which have an average transaction price above $48,000, are lower by more than 5%. Analysts say this market shift away from higher-priced vehicles, according to Kelley Blue Book research, is helping drive new-vehicle ATPs that are generally flat or lower year over year.
EV Transaction Prices
Electric vehicle prices have been a hot topic all year. KBB says EV transaction prices in September were lower year over year by 0.9%. At $56,351, the average transaction price for a new electric vehicle changed little from August and was higher than the industry-wide ATP by approximately 16%. Analysts say the premium paid for an EV in September was at its lowest point in 2024. Through the end of Q3, the EV premium has averaged 19%.
Automaker incentives for EV continue to track well above the industry average. While incentives for electric vehicles declined month over month in September, they still averaged $6,904, or 12.3% of ATP, a 0.7 percentage point decrease from August, the highest point of 2024.
The average transaction price for a new Tesla fell in September compared to August, but was still higher year over year by 13.6% at $58,212. ATPs for Tesla's core volume models – the Model 3 and Model Y – were lower month over month in September, while transaction prices for the new Cybertruck continued to climb. In September, Cybertruck ATPs hit $116,706, according to KBB estimates, the highest point since launch. Prices don't seem to be impacting demand for the EV truck, however, as more than 5,000 Cybertrucks were sold in September.
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