For the 10th consecutive month, new-vehicle prices were lower year-over-year in July as Kelley Blue Book (KBB) analysts noted higher inventory levels and higher incentives have shifted the U.S. auto market to favor buyers.
The average transaction price (ATP) for a new vehicle in the U.S. was $48,401, mostly unchanged from the revised-lower June ATP ($48,424) and down $106 from July 2023. KBB noted new-vehicle ATPs were lower in July by 3.1 percent from the $49,929 peak in December 2022.
Healthy inventory levels—2.91 million vehicles at the start of July, higher by 52 percent from a year ago as per Cox Automotive’s vAuto Live Market View – continue to keep downward pressure on vehicle prices. But high auto loan rates, which make monthly payments higher, are leading many consumers to stay on the sidelines or hunt for affordable options.
Pickups Driving Deals
“We hear this from the large dealers all the time: No matter the budget, chances are we can make something work,” said Erin Keating, executive analyst at Cox Automotive. “This is particularly true where inventory is higher, and incentives are following.”
Many popular vehicles in the U.S. market continue to transact above ATP as affordable vehicles from the compact and subcompact SUV segments accounted for approximately 1 in 4 sales in July. Incentive levels in these two segments are above the industry average and ATPs, at $36,621 and $29,827, respectively.
What is pushing the ATP is full-size pickup, accounting for 14 percent of sales in the U.S. last month. The average price paid for a new, full-size truck was $65,713. Incentive levels for full-size pickups were 8.1 percent in July, higher than the industry average. The two best-selling vehicles in the U.S. in July were the Ford F-series and the popular Chevrolet Silverado. The average transaction price for the F-Series in July was over $67,000; the Silverado ATP was over $60,000.
Incentives Growing
All pushing up the ATP are two all-electric pickup trucks priced for over $100,000— the GMC Hummer EV Pickup ($111,242) and the Tesla Cybertruck ($111,018), the later being the best-selling vehicle in the U.S. priced over $100,000.
“The thing about the U.S. is its diversity, and that goes for the U.S. auto market as well,” said Keating. “There are many expensive, high-profile vehicles out there, but consumers have many good options priced well below industry average.”
KBB highlighted that average incentives rose to 7.0 percent, or $3,383, for the average transaction price––up from 6.4 percent in June and the highest this year 2024. Incentives are now higher by 59.1 percent compared to one year ago, when the average incentive package was 4.4 percent of ATP a year earlier and at the highest point in more than three years.
Affordability Challenges
Major brands had higher incentive levels year-over-year in July, with the highest incentive spend among volume automakers at Infiniti, Volkswagen, Audi and Nissan. Conversely, incentive spending at the core Stellantis brands—Chrysler, Dodge, Jeep and Ram—remains below the industry average despite industry-leading inventory levels.
“Not every brand is seeing sky-high days’ supply, but, in most cases, where there is excess, incentives are climbing,” added Keating. “The higher incentives are helping consumers, but stubbornly high interest rates and tighter credit conditions continue to make affordability challenging. If we are going to see the market live up to its potential, we will need to see rates lower, and credit loosen.”
To that end, the auto industry welcomed the news price hikes slowed more than expected in July, and, for the first time in more than three years, the Consumer Price Index has landed below 3.0 percent. Consumer prices rose 2.9 percent for the 12 months ended in July, renewing hopes that the Fed will reduce borrowing costs.
EV Market Overview
As for the electric vehicle (EV) market, the average transaction price for July was $56,520, higher than in June but lower year-over-year by 1.5 percent. The average EV incentive package in July was over 12 percent of the transaction price, the highest level in more than three years and roughly twice the level seen in July. Most notably, EV incentives in July were 73 percent higher than the industry average.
Average transaction prices at Tesla continue to move higher after dropping to near the industry average in December 2023. Tesla ATPs were $59,593 in July, up 11 percent from a year earlier and at the highest since February 2023.
KBB analysts theorized the new Cybertruck is pulling Tesla prices higher, although the volume products, the Model 3 and Model Y, have seen prices rise consistently through the year. In July, the ATP for the Model Y was $52,055, up 5.0 percent from the first month of the year, while the Model 3 was $53,878, up a stunning 30% from January when Model 3 ATPs were $41,531. The Model Y and the Model 3 are the top-selling EVs in the U.S. market.
