News

Car Pricing Trends in January

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4.5

Andrew R. Michaud

• February 20, 2024

New Car Prices Drop in January

The average new car price in January was $47,401, indicating a 2.6% decrease from December and a remarkable 3.5% drop since the same time last year.

Lower Prices with Higher Inventory Levels

As inventories increase, so do incentives. Dealers now have more cars in stock compared to a year ago, resulting in increased competition and discounts offered to attract buyers. In January, incentives made up 5.7% of the average purchase, up from 2.8% a year ago.

Variations Across Market Segments

Not all vehicle segments saw the same trend in incentives. Luxury vehicles and full-size pickup trucks had some of the highest discounts, while small pickups, full-size SUVs, and minivans had incentives below the industry average in January.

Potential Low Inventory for Some Brands

While brands like Toyota and Kia are still experiencing low inventory levels, most automakers are now meeting or surpassing pre-pandemic supply levels for new cars.

Luxury Market Prices Down

Although Americans have been purchasing luxury cars in record numbers recently, January showed a slight decrease in luxury car sales, with 19.8% of purchases from luxury brands. However, buyers paid less on average for luxury vehicles in January, with the average transaction price dropping to $60,978.

These shifts in pricing trends reflect the current market dynamics influenced by inventory levels and consumer demand. Sales Incentives for Luxury Vehicles

In January, sales incentives for luxury vehicles averaged 6.2% of the average transaction price (ATP), marking a slight decrease from December's figures. However, this number is significantly higher — by 123% — compared to the incentive level for the same period in 2023.

2024: A More Stable Year for Car Shoppers

Experts suggest that 2024 is poised to be a more stable year for car shoppers.

EV Prices Falling

Cox Automotive and Kelley Blue Book have revised the EV transaction price data in January for a more accurate reflection of the growth in the electric vehicle market. The revised analysis indicates that the average price paid for a new electric vehicle last month was $55,353. This shows a 10.8% decrease compared to prices from a year ago. In January 2024, EV prices saw a 3.2% increase compared to December 2023, where EV ATPs averaged $53,611, marking the lowest point in the past 12 months.

Insight from Cox Automotive

Mark Strand, Senior Director of Business Intelligence at Cox Automotive, stated, "First and foremost, the overall narrative remains unchanged — EV prices have declined significantly in the U.S. over the past year, driven by price reductions at Tesla." He further explained, "Our newly revised EV pricing data now provides a more accurate representation of the real-world pricing of electric vehicles in the U.S. With new EVs entering the market regularly, our pricing models have to be continuously updated to capture an accurate market picture."

Rise in EV Incentives

In the last year, EV incentives for many models have increased more than threefold. Despite the federal government's reduction in EV incentives by implementing stricter rules against sourcing critical battery minerals from China, leading to a shorter list of EVs qualifying for the $7,500 tax credit, many manufacturers have opted to match the credit themselves.

This story was originally featured on KBB.com.