After 20 months, the average new car price has dropped to just over $48,000.
A report from Kelley Blue Book (published by parent company Cox Automotive) has revealed that the average price of new cars in America in March 2023 dropped below the manufacturer's suggested retail price for the first time in 20 months.
In January, the average new car price dropped from a record high in December 2022, reaching $49,388. But now it has dropped further, to $48,008, representing a month-to-month decrease of 1.1% or $550 compared to February's reading of $48,558.
However, the average transaction price (ATP) in March remains 3.8% higher than it was a year prior. Interestingly, manufacturers are also spending more on incentives, reaching the highest level in a year at 3.2% of the ATP with an average of $1,516.
The report explains that the average prices customers paid fell to $171 below the average MSRP. In March 2022, the average ATP was almost $1,000 over sticker, so while prices are higher than they were before, they are certainly closer to the pricing OEMs think is fair.
Sales volumes have also increased, with March seeing an uptick of 20% compared to February and 8% compared to the year before. The reasons given for this are “improved supply, a better mix of lower-priced models, and strong fleet sales.”
“The latest transaction data from March reveals new-vehicle prices continued a downward trend through the first quarter of 2023,” said Rebecca Rydzewski, research manager of economic and industry insights for Cox Automotive, adding that more vehicles on dealer lots and on those from competitor brands mean that “dealers simply don't have the pricing power they did six months ago.”
The average price of non-luxury vehicles dropped $505 to $44,182 in March, with most brands – including Chevrolet, Chrysler, Dodge, Ford, Hyundai, Kia, Nissan, and Volkswagen – recording ATP declines of between 0.2-3.8% compared to February. However, Honda and Kia have still managed to sell vehicles at between 3-6% over MSRP in March.
Unsurprisingly, luxury sales continue to take a large part of the new vehicle market, reaching 18.2% of total sales in March, down from a high of 19.3% in the first month of the year. And those buyers don't mind spending big, paying an average of $65,202, down only $9 from February.
EV prices increased slightly last month, up $313 (0.5%) with an average ATP of $58,940, despite several price cuts from Tesla. This is thanks to rival brands increasing both their market share and pricing.
Toyota executives said last month that they expect the average price of new cars in America to increase to $50,000 in 2023, but if supply issues are being resolved and inventory is beginning to grow, there's hope that the ATP will drop as dealers encounter fiercer competition. That said, increases in the base MSRP of a vehicle can counter more competitive offers from dealers.
We've already seen significant price increases for the Ford Bronco Raptor, while the wildly popular all-electric F-150 Lightning has now reached almost $62,000 – roughly 20 grand more than it cost when it launched in April 2022. At the other end of the scale, the Porsche 718 range has also recorded a price jump.
Still, a reduction in average new car prices is something to celebrate, and we hope this positive sign turns into a trend in the second quarter of the year.
Keyword: Average New Vehicle Prices Are Finally Dropping Below MSRP