New car prices are falling year-on-year for the first time in ten years

Incentives for luxury vehicles and electric cars are pushing costs down for consumers for the first time in more than a decade

December 16, 2023 at 10:04 am

    New car prices are falling year-on-year for the first time in ten years

The months of September, October and November 2023 were the only three months in the past decade where new vehicle prices fell year-over-year instead of rising. The reduction was due to dealers offering greater incentives than they have since the pandemic sent vehicle prices soaring.

In November, the average transaction price (ATP) for a new vehicle was $48,247. While this was less than 1 percent higher than October’s ATP, it was down 1.5 percent compared to November 2022.

This is attributed to sellers offering more incentives to buyers due to the normalization of supply, according to new data from the Cox Automotive. While manufacturers’ suggested retail prices (MSRPs) increased an average of 1 percent from 2022 to 2023, sales incentives reached 5.2 percent of vehicle ATP, the highest level since 2021.

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    New car prices are falling year-on-year for the first time in ten years
Credit: Cox Automotive


In other words, the data show that the size of the incentives has more than doubled over the past year. And while that may be good news for buyers looking for a new vehicle, Rebecca Rydzewski, research manager at Cox Automotive, says that dealers they are not so enthusiastic.

“While consumers may feel some relief in vehicle prices and incentives after 2023, automakers and dealers are feeling the results of downward pressure,” Rydzewski said. “Cox Automotive’s latest Dealer Sentiment Survey clearly shows that dealers are seeing a decline in profits as inventories return to normal and that incentives are emerging to help stimulate sales.”

    New car prices are falling year-on-year for the first time in ten years
Credit: Cox Automotive


ATP for the average consumer was just 98.3 percent of RDA in November 2023, the lowest level since April 2021. However, the situation remains better for buyers looking for a premium vehicle than for those looking for an affordable one.

Luxury car prices down 7.5%

Prices for new luxury cars fell 7.5 percent last month compared to November 2022. Market incentives averaged 5.8 percent ATP, which helped sales a year-on-year increase of 19.6 percent.

Incentives also help bring electric vehicle prices closer to those of internal combustion vehicles. Buyers were offered deals worth 8.9 percent of their ATP in November, the highest level on record in 2023. As a result, EVs cost an average of just 8.5 percent more than the rest of the industry last month.

Prices of ordinary cars fell by 0.3 percent

Meanwhile, ATPs for non-luxury vehicles were down just 0.3 percent in November compared to the same month a year ago. Sales also saw growth, albeit less than the luxury market. That can be attributed in part to incentives that come in at just 5 percent, slightly less than the luxury market and less than half as generous as those offered for non-luxury cars before the pandemic.

“In recent months, EV-ICE pricing parity seemed almost possible,” said Stephanie Valdez-Streaty, director of strategic planning at Cox Automotive. “It’s a complicated measure with a lot of variables, but newer products and higher rebates have reduced average EV prices, even before any tax incentives. A year ago, the EV premium was more than 30%. Today it is less than 10%.

    New car prices are falling year-on-year for the first time in ten years
Credit: Cox Automotive