The average new car buyer paid $48,759 in December — 1.3% more than in November but 2.4% less than last December. The drop marks the first time on record that car prices have fallen so far in a year.
December marks the fourth consecutive month that new-vehicle transaction prices were lower year over year, according to Cox Automotive, the parent company of Kelley Blue Book.
“The pandemic created a seller’s market in which new vehicles were transacting above manufacturers’ suggested retail price in 2022,” said Michelle Krebs, executive analyst for Cox Automotive. “That market is all but gone now.”
Dealers know it. A recent Cox Automotive survey found dealers deeply pessimistic about the current market and the short-term future of their businesses. But they’re adjusting to a new normal after record-high prices. Cox Automotive’s projections for 2024 say it may be harder for dealers than in recent years but still more profitable than historical norms.
Dealers have more inventory than they have had at any point in three years. That’s causing them to discount cars again, she explains. “Vehicles are now typically selling for under MSRP. The shift from a seller’s market to a buyer’s market is well underway.”
Incentives made up 5.5% of the average new car sale last month. One year before, they were just 2.7%.
There is still room for prices to fall. Pre-pandemic, incentives sometimes made up 10% or more of the average sale.
Some Brands Discounting More Than Others
The average non-luxury car buyer paid $45,283 last month — an increase of $901 (up 2%) from November but lower year over year by 0.8%.
But prices changed more at some dealerships than others. Among non-luxury brands, Ram (11.5%), Hyundai (8.4%), and Dodge (4.3%) posted the largest year-over-year price increases, while Nissan (-4.7%), Subaru (-4.1%), and Ford (-2.5%) posted the largest declines.
Luxury Vehicle Sales Rise
More than a fifth, 20.2%, of the cars Americans bought last month were luxury vehicles. That figure has only crested 20% once before — last November, when it hit a record 20.3%.
Luxury car prices have fallen faster than mainstream car prices. The average luxury car buyer paid $62,523 in December — 1% less than in November and an eye-popping 8.8% less than a year ago. Incentives made up 6.2% of the average luxury car sale.
Electric Vehicles Getting Closer to Price Parity
Electric car buyers paid an average of $50,798 last month — down more than $1,500 from November’s average.
Electric vehicle (EV) prices fell almost 18% during 2023. The drop came thanks to aggressive price cuts from Tesla and rivals moving to match.
“Last year’s main story was Tesla price cuts that shook up the market and challenged the profitability picture for all automakers,” says Stephanie Valdez Streaty, director of Industry Insights at Cox Automotive. “Tesla is by far the dominant force in electric vehicles — when they cut prices, everyone takes notice.”
Significant federal tax incentives knocking up to $7,500 off the price of many EVs also played a role.
In December, EV incentives reached their highest point of 2023 at 10.6% of the average transaction. A year ago, EV incentives were less than 2% of most sales.
That trend may end this month, as recent changes to federal rules wiped out the incentives for many EVs, at least temporarily.
