It continues to be a buyer’s market for new car customers.
An analysis by Kelley Blue Book (KBB) found new-vehicle transaction prices (ATP) in March 2024 were $47,218, down 1% a year ago 5.4% from the market peak in December 2022. S
KBB officials cited supply recovery as the most important contributor to recent sales results compared to last year. At the start of March, new-vehicle inventory in the U.S. stood near 2.74 million units, a 52% increase from one year earlier.
While sales were down month over month in March, a seasonally adjusted annual rate (SAAR) of sales of 15.5 million has 2024 remaining on track to be the best new-vehicle sales year since 2019.
Lower Prices But Economic Concerns
“A healthy 15.5 million new car SAAR is welcome as consumers enjoy lower prices thanks to significant supply recovery and a doubling of incentive spend compared to last March,” said Erin Keating, executive analyst for Cox Automotive, said in a press statement.
But Keating did warn that “historically high interest rates and associated inflation combined with an ever-widening deficit of available vehicles at lower price points, will continue to challenge affordability for most car buyers.”
The average incentive spend from manufacturers increased 11% to $3,121, exploding 102% year over year. Reaching the highest level since May 2021, incentives as a percentage of average transaction price increased to 6.6%, up from 5.9% in February and more than double the average of 3.2% recorded in March one year ago.
Luxury Market
Luxury vehicle incentives continue to be more generous than non-luxury—averaging 7.5% of ATP that is more than twice the level seen one year ago. The luxury ATP in March was $62,067, a decrease from February.
More automakers offered incentive packages over 10% of ATP in March compared to February. Incentives were highest for Polestar, Lucid, Tesla, Infiniti, Mini, Nissan and Volkswagen, according to KBB estimates.
Only three automakers—Land Rover, Porsche and Toyota—had incentives at or below 3.2% of ATP, the average incentive one year ago. According to Kelley Blue Book estimates, incentives at Land Rover averaged only 2.4% of ATP. Yet, the average price paid for a new Land Rover last month was still above $101,000.
Fewer Affordable Options
The industry’s focus on luxury vehicle continues to make affording a new vehicle more difficult for the average consumer. Non-luxury vehicle incentives averaged 6.4% in March, an increase from 3.8% in February. Non-luxury vehicle ATPs last month were $44,083, down from February when prices were estimated at $44,548.
In March, of the roughly 275 new-vehicle models available in the U.S. market, only eight had average transaction prices below $25,000 and only two transacted for less than $20,000. For a comparison, more than 20 vehicles had transaction prices routinely below $25,000, including seven different models transacting below $20,000 in March 2021,
The March KBB report shows that significantly more vehicles in the U.S. transact at prices above $75,000 (sales of more than 81,000) than below $25,000 (nearly 52,000). According to the latest Cox Automotive/Moody Analytics Vehicle Affordability Index, new-vehicle affordability moved positively for consumers to the best level in 31 months. Still, affordability remained far worse than it was in 2019.
