Auto Service World
News   January 26, 2024   by Adam Malik

U.S. new vehicle prices drop

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While Canadians are seeing new vehicle transaction prices increase, Americans are seeing things trend in the other direction.

In the fall, DesRosiers Automotive Consultants reported that Canadians were paying an average transaction price (ATP) of nearly $53,000 at the dealership for a new vehicle as of the third quarter of 2023, That’s up 6 per cent from the end of 2022.

That’s still far cheaper than it is to buy a vehicle south of the border, though their prices have been moving downward. And automaker incentives have been on the rise.

Kelley Blue Book released data last month showing a marginal increase in the ATP of new vehicles in the United States as of November 2023. The ATP stood at USD$48,247 — about CAD$65,00 — marking an increase of less than 1 per cent from the previous month.

But that’s a 1.5 per cent decrease year-over-year. Notably, this decline represents the third consecutive month of year-over-year decreases, a rare occurrence over the past decade.

In a year headlined by economic uncertainty, new-vehicle sales incentives have increased, surpassing 5 per cent of the ATP for the first time since September 2021. This 136 per cent year-over-year increase in incentives indicates a shift towards a buyer’s market.

Despite lower ATPs, the data suggest that these reductions are due to discounts and incentives rather than a decrease in vehicle prices. In November, the average price fell to 98.3 per cent of the manufacturer’s suggested retail price (MSRP), the lowest since April 2021.

“While consumers may feel some relief in vehicle prices and incentives as we close out 2023, automakers and dealers are feeling the results of the downward price pressure,” said Rebecca Rydzewski, research manager at Kelley Blue Book publisher Cox Automotive.

She added that dealers are seeing profits contract as inventory levels return to normal as incentives are turned up to help stimulate sales.

Kelley Blue Book’s analysis of 35 brands revealed significant variances in pricing trends. Brands like Tesla, Buick, Land Rover, and Nissan saw the most significant year-over-year price declines in November, while Dodge, Ram, Audi, and GMC recorded the largest increases.

The luxury vehicle market is leading the downward trend in prices, likely stimulating sales during a typically strong period for luxury vehicle purchases. The average luxury vehicle price in November in the U.S. was $63,235, down 7.5 per cent year-over-year, with luxury brand incentives averaging 5.8 per cent of ATP. In contrast, non-luxury brands saw a slight price increase to $44,417, with incentives averaging 5 per cent.

Electric vehicles (EVs) also saw notable price shifts. The average price for a new EV in November was $52,345, up from October and 8.5 per cent higher than the industry average. EV incentives reached a peak of 8.9 per cent of ATP, significantly higher than the previous year.

Stephanie Valdez-Streaty, director of strategic planning at Cox Automotive, highlighted the narrowing price gap between EVs and internal combustion engine vehicles, noting that the EV premium has decreased from over 30 per cent to less than 10 per cent within a year.

“In recent months, price parity between EVs and ICE has almost seemed possible,” she said.

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