New-vehicle prices continued an eight-month streak of being lower than the month before, aided by high incentives.
According to estimates by Kelley Blue Book, the average transaction price (ATP) in May for a new vehicle in the U.S. was $48,389, statistically unchanged from the downwardly revised price of $48,368 in April, and lower year-over-year by $442 (0.9 percent).
Higher incentives helped make new vehicles more affordable in May, accounting for 6.7 percent when discounts and rebates were included—an increase from April and the highest level since May 2021. Incentives in May were approximately $3,200, notably higher than one year ago when discounts were measured at 4.0 percent of ATP.
Buyer’s Market
There are still plenty of excellent, well-priced vehicles out there, particularly in the compact segments, noted Erin Keating, executive analyst for Cox Automotive.
“In May, we saw some positive news on the sales front,” said Keating in a press statement. “A lot of those sales gains were juiced by higher incentives and lower prices, which is good news for consumers worrying about inflation. While there are a lot of vehicles transacting at very high prices, that doesn’t mean all new vehicles are unaffordable.”
Higher new-vehicle inventory continues to keep industry-average prices in check and drive incentives higher, as consumers have more choices and dealers are willing to deal. At the beginning of May, new-vehicle inventory was estimated at 2.84 million, which was higher year over year by 51 percent and at the highest point since late 2020, according to vAuto Live Market View. Many brands had more than 100 days’ supply at the start of May, with Toyota, Lexus and Honda had days’ supply under 60.
Trucks Driving ATP
KBB officials noted average industry prices are being pushed higher by expensive, high-volume models. In May, as is typical in the U.S. market, four of the top 10 best-selling vehicles in the U.S. were full-size pickup trucks – the Ford F-Series, Chevrolet Silverado, Ram Pickup and GMC Sierra.
All four trucks posted ATPs above $60,000, with the GMC Sierra – No. 7 in the top 10 list – above $70,000.
The best-selling vehicle in the U.S. last month, the Ford F-Series pickup, had an average price near $68,000. As ATP estimates are volume-weighted to reflect market realities properly, high-volume vehicles have more influence on the calculation.
Affordable Vehicles Available
While four popular pickup trucks push prices higher, five of the top 10 most popular vehicles transacted at prices below $40,000. The Toyota RAV4— the third most popular vehicle in America—had a transaction price averaging $37,608, while the Honda CRV—No. 4 in sales—had an ATP in May of $37,364, nearly 23% below the national average.
This data led Keating to note that the U.S. market is very diverse, with plenty of popular, high-priced vehicles that sell very well and drive the average higher.
“The popularity of fully loaded, full-size pickup trucks that are more luxurious than many luxury vehicles is unique to the U.S. market,” she said. “The Ford F-Series outsold BMW 2-to-1 in May, and BMW’s ATP was only marginally higher than the F-Series.”
Middle Market Declining
Last month, the share of vehicles transacting below $40,000 increased compared to May 2023, suggesting a market shifting to more affordable models. KBB reported new-vehicles sold below $40,000 accounted for 41.2 percent of new-vehicle sales in May, up from 36.8 percent one year ago with approximately 70 different models available for below $40,000. The Mitsubishi Mirage was the only vehicle transacted below $20,000 that had significant sales.
But there are nearly 100 different models with posted ATPs over $60,000 in May, accounting for 26.4% of total sales, rising six percentage points from May 2023. The most expensive vehicle tracked was the Mercedes G-Class, with an average transaction price above $208,000 and sales of more than 1,000 units last month.
The middle of the market, vehicles with ATPs ranging from $40,000 to $60,000, lost share in May, falling to 32.5 percent last month from 37.9 percent a year earlier.
