New car prices continue downward trajectory, EVs buck trend

The growth in new car supply forced average new vehicle transaction prices to fall again despite a minor pullback in incentive spending and decreased auto credit availability.

Driving the news: For 9 consecutive months, new car prices have been declining. In June, the average transaction price (ATP) for a new vehicle in the U.S. was $48,644 – $266 less than in May and $307 lower than a year ago. 

The reasons? 

1. The average buyer saved around 6.4% off the sticker price (ATP), which comes out to about $3,102. This is down from 6.7% in May, but still better than last year when discounts were only around $2,036

2. High-volume pickup trucks from Ford, Chevrolet, Ram, and GMC helped to skew the average higher. For example, the Ford F-Series ATP was $67,443, up 30% from five years ago. 

Key quote: “As we head into the back half of the year, we are seeing that automakers are showing real discipline on pricing,” said Cox Automotive Executive Analyst Erin Keating. “Even brands holding onto more days’ supply, like many Stellantis brands, are keeping incentive spend in check. In June, Jeep increased to 6.3% – still below the industry average – from 5.3%, and Ram actually declined to 5.5% from 6.3%. There appears to be a real effort to hold the line out there.”

The intrigue: Even though the average new car in the U.S. costs around $49,000, many sold for much less.

• In fact, over 40% of new vehicles sold in June went for under $40,000, and a quarter (26%) landed between $30,000 and $40,000.

• Kelley Blue Book found that half of the top ten best-selling cars in June were priced below $40,000, including the Toyota RAV4, Honda CR-V, and Toyota Camry to name a few.

Zooming out: Historically elevated ATPs don’t mean that there are no affordable cars in the market. Nearly half of all vehicle prices were below June’s average – a positive sign for new car demand. 

On the other hand, would-be new EV buyers are facing higher ATPs ($56,371) month-over-month after hitting a low in February ($52,314). Tesla is largely responsible for the uptick in average prices as the market leader. 

• While popular models like the Model Y and Model 3 haven't changed much recently, Tesla's new Cybertruck had an average price tag of a whopping $112,696.

• Even though prices are on the rise, EV sales just had a record-breaking quarter. Over 330,000 EVs were sold in the U.S. during Q2, an 11% jump compared to last year.

What we’re watching: What typically matters most to car buyers is their monthly payment and persistently high interest rates combined with decreasing auto loan access are putting pressure on this affordability marker. Is the decline in average new car APTs enough to lower payments substantially and translate into meaningful sales? Time will tell.

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