New data from Cox Automotive reveals that the average transaction price (ATP) for new vehicles has fallen below MSRP for the first time in nearly two years.
In March, customers paid an ATP of $48,008, down $550 or 1.1% from February’s average of $48,558. By the end of the month, new vehicles were retailing for $171 below MSRP, a significant improvement from last year when buyers were paying an additional $1,000 on their car purchases. While cars are still more expensive than they were a year ago, this change finally ends a 20-month-long period where customers paid above sticker price. Dealers saw sales grow by 20% month-over-month and 8% year-over-year.
These changes can be attributed to improving inventory levels and the highest OEM incentive spend seen in over a year. “We’ve been anticipating transaction price declines as inventory has steadily improved and choice has expanded,” remarked Rebecca Rydzewski, Cox Automotive’s research manager of economic and industry insights. While the ATP for both luxury and non-luxury models declined, strong sales for the former prevented prices from slipping further.
While most brands saw lower ATP numbers compared to the same period in 2022, several automakers still witnessed month-over-month improvements. Rivian, Toyota and Honda saw the largest increases, growing 4.5%, 3% and 0.5%, respectively. While Tesla has slashed prices several times since the start of the year, it also experienced a monthly ATP increase of 0.4%. Electric vehicles cost $313 or 0.5% more on average in March than in February.
Even though a declining ATP is good news for consumers, the costs of new vehicles remain inflated. Rydzewski noted that many buyers are still paying inflated auto loan rates, “making new-vehicle affordability an issue for many households.” It remains to be seen how the car market will change as buyer demand shifts, but dealers are likely to see the gap between transaction price and MSRP widen before the end of 2023.
