Dealer inventory is increasingly healthy, but prices paid for new vehicles in July 2023 rose only 0.4% from one year ago. That’s the smallest year-over-year price increase in the past decade, according to Kelley Blue Book (KBB).
The average transaction price (ATP) paid for a new vehicle in July 2023 was $48,334, KBB reports. That’s a month-over-month decrease of 0.7% ($337) from June’s ATP of $48,671 and up only $199 from July 2022. Compared to the start of the year, transaction prices are down 2.7%, or $1,335, the most significant January-to-July tumble in the past decade.
“New-vehicle price inflation has all but disappeared in 2023,” says Rebecca Rydzewski, research manager at Cox Automotive. “New-vehicle prices, primarily driven by cuts in luxury and electric vehicles, are decreasing as inventory steadily improves. With higher inventories and incentives helping to keep downward pressure on prices, there certainly are good reasons for shoppers to be heading back into the market.”
Auto manufacturers’ incentive spend increased for the tenth consecutive month in July to the highest level since October 2021, averaging $2,148, or 4.4% of the average transaction price. One year ago, average incentive spending was 2.4% of ATP.
Average Prices for Non-Luxury Vehicles Decreased in July
The average price paid for a new, non-luxury vehicle in July was $44,700, down $471 compared to June. Year over year, non-luxury prices increased by only 0.5%. However, non-luxury vehicle prices have held remarkably steady since January, fluctuating up and down by only a few hundred dollars.
The bigger story, KBB reports, is that unlike five years ago, only one model transacted below $20,000 in July. The Mitsubishi Mirage’s average transaction price in July was $19,205. In July 2018, a dozen vehicles with ATPs were below the $20,000 barrier. In comparison, many of today’s smallest vehicles, including the Hyundai Venue, Kia Rio, Nissan Versa and Toyota Corolla, have manufacturer pricing well over $20,000.
Yet 32 vehicles in the Kelley Blue Book database transacted on average over $100,000 in July, excluding super-exotics from Ferrari, Lamborghini and Rolls-Royce. In comparison, five years ago, in the summer of 2018, there were only 12 vehicles in the over $100,000 category.
The average incentive in the non-luxury segment was 4.3% of ATP in July, up from 2.5% one year ago. Even mainstream brands with particularly tight inventory – Honda, Kia and Toyota – raised their incentive spending in July but were still below the industry average.
Average Luxury Prices Down Year Over Year, Largest Decline in a Decade
Luxury vehicle prices in July were down almost 3% year over year. The average luxury buyer paid $63,552 in July, down $192 from June. Between January and July 2023, luxury prices declined by more than 5%. As widely reported, Tesla has slashed prices by more than 19% by July 2023. The average Tesla buyer spent $54,660 for a new vehicle in July, down from more than $62,000 in January and the lowest ATP for Tesla since April 2020, KBB reports.
That doesn’t mean dealers aren’t moving luxury cars off their lots. The luxury share of the U.S. market was 19.3% in July, the highest share so far in 2023. KBB analysts say the lower prices at Tesla are likely helping support sales volume. In July, Tesla’s volume reached a record high of 59,813 units.
Electric Vehicle Prices Continue to Decline
EV prices continue to fall, once again led by market leader Tesla. In July, the average EV ATP was $53,469, down from $53,682 in June and down from more than $61,000 in January. Incentives for EVs in July were 6.7% of ATP, or $3,755. EV ATPs are down more than 19% from their recent peak of more than $66,000 reached just over a year ago in June 2022.
EV price declines mirror the inventory increases experienced by some dealers. At the end of July, the EV segment days’ supply was near 100 days, while industry days’ supply stood at 54, reports KBB.
“Tesla prices are down nearly 20% versus a year ago, and other EV models, such as the Ford F-150 Lightning, have been following Tesla’s lead,” says Rydzewski. “While automakers report losing money on electric vehicles, they continue to aggressively pursue EV growth strategies.”
Auto Incentives Offered by Manufacturers Reach One-Year High
Incentives averaged $2,148 in July to reach the highest point in a year, increasing to 4.4% of ATP compared to 4.2% in June. While July incentives increased by $112 month over month, they remain historically low. For comparison, Kelley Blue Book estimates incentives averaged 5.9% of ATP in July 2021 and 10.3% in July 2019.
The high-end luxury car segment had the highest incentives in July 2023 at 9.6% of ATP, followed by luxury cars at 8.4%, hybrid vehicles at 7.7%, entry-level luxury cars at 6.9% and electric vehicles at 6.7%. Fullsize luxury SUVs, high-performance cars and sports cars had some of the lowest incentives in July.
