New car inflation is ‘disappearing,’ but the news isn’t all good

Photo (c) Marko Gerber - Getty Images

Only one new model sold for less than $20,000 in July

There’s good news about new car prices. Cox Automotive reports they barely rose over the last 12 months.

But there’s also some bad news. The price of a new car or truck sits at an all-time high, with an average transaction price (ATP) in July of $48,334. With still rising auto financing rates, that stretches affordability for the average consumer.

“New-vehicle price inflation has all but disappeared in 2023,” said Rebecca Rydzewski, research manager at Cox Automotive. “New-vehicle prices, primarily driven by cuts in luxury and electric vehicles, are decreasing as inventory is steadily improving. With higher inventories and higher incentives helping to keep downward pressure on prices, there certainly are good reasons for shoppers to be heading back into the market.”

Maybe, except for that ATP of more than $48,000. With inflation in other areas raising the cost of living, a prudent consumer might think twice before taking on more expensive debt. But for consumers willing and able to buy a new vehicle, dealers are working harder than they have in years to make it worth their while.

More incentives

Cox reports manufacturers increased their incentive spending in July for a tenth straight month, averaging $2,148 or 4.4% of the ATP. That’s about double what it was a year ago.

Still, challenges remain for new car buyers. Even non-luxury models averaged $44,700 in July. 

The bigger story is that unlike five years ago, only one model transacted below $20,000 in July. 

The Mitsubishi Mirage’s ATP in July was $19,205, becoming one of the only affordable new vehicles for buyers on a tight budget. In July 2018, there were a dozen vehicles with ATPs below the $20,000 barrier. 

Today, models like the Hyundai Venue, Kia Rio, Nissan Versa and Toyota Corolla, are all selling for well over $20,000. At the other end of the scale there were 32 vehicles in the Kelley Blue Book database selling for an average price of over $100,000 in July.

Today, a vehicle doesn’t have to be a “luxury car” to be considered a luxury for many consumers.

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