The average new car sold for $47,401 in January — a 2.6% drop from December. Prices are down a remarkable 3.5% since last January.
“It is common to see lower transaction prices and sales in January, as December typically is a hot month for luxury vehicle sales,” said Erin Keating, executive analyst for Cox Automotive. “However, the year-over-year new-vehicle ATP decline of 3.5% is notable. Prices have been trending downward for roughly six months as automakers are sweetening deals to keep the sales flowing.”
Cox Automotive is the parent company of Kelley Blue Book.
As Inventories Climb, So Do Incentives
Prices are coming down because inventory levels are rising. When most dealers have plenty of cars in stock, they have to offer incentives to compete with one another for your business.
A year ago, America’s car dealers had 750,000 fewer cars in stock, and incentives made up 2.8% of the average new car sale. In January, with inventory approaching pre-pandemic norms, discounts were 5.7% of the average purchase.
The story isn’t the same in every segment of the market. Luxury vehicles and full-size pickup trucks had some of the highest discounts in January. Conversely, incentives for small pickups, full-size SUVs, and minivans were well below the industry average in January, averaging less than 3%.
A handful of brands, including Toyota and Kia, still have historically low inventory numbers. But most are now at or above the supply of new cars they tried to keep pre-pandemic.
Luxury Prices Leading Market Lower
Americans have bought record numbers of luxury cars in recent months. That trailed off slightly in January, with 19.8% of purchases coming from luxury brands — down from a peak of 20.6% in December.
But luxury car shoppers paid less last month.
The average price paid for a luxury brand vehicle in January was $60,978, down from $62,834 in December. It’s the lowest average transaction price since the summer of 2021.
Sales incentives for luxury vehicles averaged 6.2% of ATP (average transaction price) in January, which is slightly lower than December’s number. However, it’s significantly higher — 123% —than the incentive level for January 2023.
EV Prices Falling
Cox Automotive and Kelley Blue Book revised the EV transaction price data in January to more accurately reflect the growth of the electric vehicle (EV) market. The average price paid for a new electric vehicle last month was $55,353, according to the revised analysis. EV prices have fallen 10.8% compared to year-ago numbers. January 2024 EV prices were higher month over month by 3.2%, as EV ATPs in December 2023 averaged $53,611, the lowest point in the past 12 months.
“First and foremost, the overall narrative is unchanged — EV prices have come down significantly in the U.S. in the past year, led by price cuts at Tesla,” said Mark Strand, senior director of Business Intelligence at Cox Automotive. “Our newly revised EV pricing data more accurately reflects the real-world pricing of electric vehicles in the U.S. With new EVs launching into the market seemingly every month, our pricing models have to be continually updated and revised to capture a clear picture of the market.”
EV incentives for many models have risen more than threefold in the past 12 months. That’s happening despite the federal government effectively reducing its EV incentives with strict new rules against sourcing critical battery minerals from China. That move drastically shortened the list of EVs that qualify for the government’s $7,500 tax credit, but many manufacturers have chosen to match the credit themselves.
