New-Vehicle Prices Drop for 8th Month Amid High Inventory

In addition to increased inventory levels, new-car buyers are also enjoying higher incentives compared to a year ago.


New-vehicle prices in the U.S. continued to decline for the eighth month in a row, according to Kelley Blue Book's latest estimates. The average transaction price (ATP) for a new vehicle in May was $48,389, a slight decrease of 0.9% from the previous year, largely due to increased inventory levels and higher incentives.

Higher inventory levels have significantly influenced the pricing dynamics in the automotive market. As of early May, new-vehicle inventory reached 2.84 million units, marking a 51% year-over-year increase and the highest level since late 2020. This surge in inventory has provided consumers with more choices and prompted dealers to offer better deals.

"In May, we saw some positive news on the sales front," said Erin Keating, executive analyst for Cox Automotive. "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. There are still plenty of excellent, well-priced vehicles out there, particularly in the compact segments."

The average new-vehicle incentive package in May was 6.7% of the ATP, translating to about $3,200 per vehicle, an increase from last year's 4.0% of ATP, making new vehicles more affordable.

Despite the overall decline in new-vehicle prices, the market remains diverse with significant price variations across different segments. Four of the top 10 best-selling vehicles in the U.S. were full-size pickup trucks, such as the Ford F-Series and Chevrolet Silverado, with ATPs exceeding $60,000. Conversely, popular models like the Toyota RAV4 and Honda CR-V had transaction prices well below the national average, at $37,608 and $37,364, respectively.

"It's called an average for a reason," said Keating. "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. The Ford F-Series outsold BMW 2-to-1 in May, and BMW's ATP was only marginally higher than the F-Series."

Last month, the share of vehicles transacting below $40,000 increased compared to May 2023, suggesting a market shifting to more affordable models. Vehicles transacting below $40,000 accounted for 41.2% of new-vehicle sales in May, up from 36.8% one year ago. Kelley Blue Book counted approximately 70 different models available for below $40,000. Only one model with meaningful sales volume -- the Mitsubishi Mirage -- transacted below $20,000.

The electric vehicle market also experienced price fluctuations. Tesla's ATP rose by 3.1% month over month to $57,369 in May, driven in part by the increasing sales of the Cybertruck -- an estimated 3,000 were sold in May, at an ATP of $108,667. Overall, EV prices in May were 2.6% higher than in April, although they were 4.1% lower year over year.

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