New cars and trucks are still in short supply, but at least the cost of buying one went down last month. Kelley Blue Book (KBB) reports that the average transaction price (ATP) of a new vehicle fell slightly after reaching a record high in December.
The March ATP was $45,927, which was a decline of $156 from the month before. But compared to March 2021, buyers spent an average of $5,247 more, a 12.9% increase.
Inventory levels remained low, but there was no letup in consumer demand. That enabled dealers to continue to sell vehicles above the manufacturer's suggested retail price (MSRP), or “sticker price.”
In March, new vehicles from Kia, Honda, and Mercedes-Benz were selling between 7.8% and 9.8% over MSRP on average. On the other side of the spectrum, Volvo, Buick, and Lincoln were selling around 1% below MSRP.
“With a myriad of supply chain issues disrupting global vehicle production, we expect inventory to remain tight through the rest of the year and prices to remain high,” said Michelle Krebs, executive analyst for Cox Automotive, parent company of KBB.
Automakers have discouraged dealers from marking up vehicles beyond the sticker price, fearing damage to the brand if consumers feel they are being gouged. While the average MSRP on a non-luxury vehicle has decreased over the past five months, car shoppers are still paying more than $970 above the sticker price on average.
In fact, new car buyers have paid more than MSRP for each of the last 10 months. A year ago, KBB reported that non-luxury vehicles were selling for more than $1,300 under MSRP.
Government data shows used car prices are falling
The March Consumer Price Index (CPI), released Tuesday, actually shows a slight increase in new vehicles. The government data shows that consumers paid 0.2% more for a new car or truck than they did in February.
The March CPI also shows that the prices of used cars and trucks fell significantly, dropping 3.8% from the previous month. However, used vehicle prices have surged by 35.3% and new vehicle prices have risen by just 12.5% in the last 12 months.
Not only are new car buyers paying above the sticker price in many cases, but they're also getting fewer incentives from dealers and automakers. Jonathan Smoke, chief economist at Cox Automotive, says the percentage of dealers and manufacturers offering 0% financing last week was around 8.2%.
Smoke says that was a slight increase from the week before, but about 20% of dealers were offering interest-free financing in March 2020, at the start of the pandemic.