High inventory continues to push new car prices down

Author

Anna del Villar
June 12, 2024

In a classic display of supply and demand, higher new car inventory levels at the beginning of May pushed down average transaction prices (ATP) year-over-year.

Context: Last month started off with 2.84 million units of inventory, a 51% year-over-year increase, and the highest level since late 2020. 

  • The industry average days supply was 76 according to vAuto. Out of over 30 brands tracked, only 10 had a days’ supply lower than the national average. 

  • On the other end of the spectrum, 15 brands had more than 100 days’ supply. Jeep, Ram, Jaguar, and Alfa Romeo all had at least twice the industry average.

Big picture: Although statistically unchanged from April ($48,368) the APT for May was $48,389, down 0.9%, year-over-year. 

What’s more: An increase in incentives also made new car more affordable in May.

  • Last month incentives made up 6.7% or $3,200 of the ATP, says Kelley Blue Book. 

  • This is an increase from April and the highest level since May 2021. Last year, discounts were only 4% of the ATP. 

Yet, EV incentives outpace the overall market by nearly double. The average discount for an EV was 12.4% ATP, 5.7% higher than the industry average. And it's driving prices down at a more accelerated rate. Industry-wide EV prices last month declined year over year by 4.1% to $56,648.

Why it matters: The return of inventory and incentives are giving car buyers a wider breadth of more affordable options. Yes, new cars are still transacting at high prices, but there are still plenty of lower-priced cars out that are within reach for many consumers. Dealers, on the other hand, have an opportunity to increase their sales volume under these conditions. 

Between the lines: Taking all of this data in, why haven’t prices come down even more year-over-year if inventory is up 51% and incentives are at a 3-year high? It’s complicated. Full-size pickup trucks continue to dominate the lists of best-selling vehicles, something unique to the American market. Yet, all four trucks in the top 10 for sales posted ATPs above $60,000, inflating the overall ATP. 

Good news: The share of vehicles selling under $40,000 is increasing, reaching 41.2% in May 2024 compared to 36.8% a year prior. And there are many popular models like the Toyota RAV4 and Honda CR-V that are transacting well below the industry average.

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