New vehicle sales are holding steady in the U.S. as dealers prepare for a busy market in the months ahead. Unfortunately, the same can not be said for prices, which, as many experts have noted, are starting to creep back toward pre-pandemic averages.
On this episode of Inside Automotive, host Jim Fitzpatrick is joined by Brian Moody, executive editor at Cox Automotive. Moody has helped shed light on the numerous factors impacting dealers in today’s landscape and how even the slightest shifts in consumer preferences can have surprising consequences. Now, he delves into the topic of new vehicle prices and what this means for the retail automotive sector.
Key Takeaways
1. Moody notes there has been a noticeable 3.5% decline in the average transaction price for new vehicles compared to last year. He attributes this drop to increased car supply and manufacturer incentives, which contrasts with the previous scarcity of vehicles during the pandemic.
2. Automakers are responding to today’s market conditions by significantly boosting incentives, which have nearly doubled compared to the previous year. These incentives include advertised leases, low APR financing, and cash-back offers, making new vehicles more accessible to consumers. These are helping bring consumers back to the market, driving up sales in the process.
3. Despite these shifts, there still remains concern that new vehicle prices, particularly electric vehicles (EVs), which are nearing average transaction prices of $60,000, will continue to increase. However, Moody also points out that even the prices of expensive EVs have been decreasing, making them more attainable for the average consumer.
4. Moody discusses how the trends in new vehicle transaction prices could influence the used car market. With the increased supply of new cars and the introduction of more incentives, there is downward pressure on used car prices, which may benefit consumers looking for more affordable vehicle options. That also represents opportunities for dealers to drive volume.
5. Leasing may help further address some of the current affordability issues in the industry. Moody speculates there may be future shortages in the used car market due to past decreases in new vehicle production and leasing, which could impact the availability and price of specific used car models.
"A lot of consumers assume that electric cars are still very expensive, and many times they are; depending on what you get, [like] a Mercedes Benz, of course, it's very expensive. Those cars are typically luxury cars. But the price of electric cars overall has come down. Down quite considerably to the point where the average price spent for a consumer on your typical electric car is now below the average price or the average transaction price of a luxury car." — Brian Moody
