New vehicle prices dropped again in February, progressing toward pre-pandemic averages while sales and inventory improved.
According to Cox Automotive, the average new vehicle transaction price in February was $47,244, 2.2% lower than last year but still higher than before the COVID-19 pandemic. The month-over-month change was negligible, with prices coming in only 0.3% behind January. While the declines were slight for most of the market, electric vehicle prices deflated faster than in other segments, falling 13% compared to early 2023 to $52,314.
However, while prices weakened, new vehicle sales and supply remained strong. The seasonally adjusted annual sales rate in February was 15.8 million, greater than January’s 15 million but behind December’s pace of 16.1 million. Inventory has risen steadily since last year thanks to renewed OEM production. While the greater supply has weakened prices, it has also helped spur sales.
Despite the lower costs, many car buyers remain priced out of the new vehicle market. Affordability measures remain poor in the automotive industry despite increases in discounts and incentives implemented by dealers and OEMs. Cox Automotive notes that only nine current model-year cars had an average transaction price below $25,000 in February. Three years ago, that number was 29.
Nevertheless, while the market remains hostile to consumers, prices are moving in the right direction, even if the movement is only just discernable. Manufacturers are also using incentives to lure more buyers to the dealership. Incentives took off 5.9% of the average new vehicle price in February after hitting 5.7% in January. The more these trends continue, the more sales are likely to increase.
