It’s a Buyer’s Market - Average Transaction Prices Drop, and Incentives Increase for New Vehicles

While broader US economic news remains positive, inflation remains a lingering concern. January numbers are in, and the 3.1% increase did not bode well for the automotive sector.

KEY TAKEAWAYS

• It’s a buyer's market for new luxury, non-luxury, and EV vehicles
• Average sales transaction prices are down, and incentives are up
• The average price for a Tesla Model Y has dipped below $50,000

Automotive dealers have both lowered prices and sweetened incentives, but that wasn’t enough to keep new-vehicle transaction prices from tumbling further. Transaction prices in January 2024 were down 3.5% year-over-year. Moreover, the seasonally adjusted annual rate (SAAR), commonly referred to as the sales pace, was down roughly 6% in January compared to just a month earlier.

Luxury Vehicle Prices

If you’re in the position to buy a new luxury model, the good news is the average price dropped from $62,834 in December 2023 to $60,978 in January 2024. According to Kelley Blue Book’s analysis, luxury car prices were down 9.7% year-over-year in January, and luxury compact SUV prices plummeted even further - 11.9% year-over-year.

Non-Luxury Prices

Non-luxury brand average prices behaved similarly, decreasing year-over-year by 2.1%. Incentives increased 5.5% from December to January for non-luxury vehicles but produced a negligible effect. Like luxury vehicle shoppers, it’s a buyer's market as dealer inventory levels are up, featuring a bevy of choices, discounts, and lower prices.

EV Sales

The EV sector is expected to slow in 2024. Concerns over charging station rollouts and driving range are increasing, and it appears hybrid models, like the Toyota Corolla Hybrid that just reported an “all-time best-ever” year for sales in 2023, will be preferred moving forward. The average price for a new EV in January 2024 was $55,353, tumbling 10.8% year-over-year. Meanwhile, EV incentives have skyrocketed more than three-fold over the past 12 months.

Tesla

The industry’s volume leader produced approximately 495,000 vehicles in the fourth quarter of 2023. Yet, prices have cratered by over 21% during the past year. It continues to be a buyer’s market, and believe it or not, a new Tesla can now be purchased for less than $50,000.