New prices decline in U.S.

New vehicle prices remained lower year-over-year for the eighth consecutive month in the U.S. as of May, as higher inventory levels continued to exert downward pressure on transaction prices.

According to Kelley Blue Book, the average transaction price (ATP) for a new vehicle in the U.S. was $48,389, a 0.9 per cent decrease, approximately $442, from May 2023.

Increased incentives played a significant role in making new vehicles more affordable, according to the group. The average incentive package, which includes discounts and rebates, rose to 6.7 per cent of the ATP, the highest level since May 2021. Incentives in May averaged around $3,200, an increase from one year ago when they were 4 per cent of ATP.

“In May, we saw some positive news on the sales front,” said Erin Keating, executive analyst for Cox Automotive. “Higher incentives and lower prices have been beneficial for consumers, especially those concerned about inflation. While many vehicles are still selling at high prices, there are excellent, affordable options, particularly in the compact segments.”

Higher inventory levels are a key factor in the current pricing trends. At the beginning of May, new vehicle inventory was to be at a 51 per cent increase year-over-year and the highest level since late 2020, according to vAuto Live Market View. Many brands had more than 100 days’ supply, with only Toyota, Lexus, and Honda having less than 60 days’ supply.

This abundance of inventory is keeping prices in check and driving higher incentives as dealers compete for customer, according to KBB.

In May, four of the top 10 best-selling vehicles were full-size pickup trucks, each with ATPs above $60,000. Despite these high-priced trucks, five of the top 10 most popular vehicles had transaction prices below $40,000, significantly below the industry average of $48,389. For instance, the Toyota RAV4, the third most popular vehicle, averaged $37,608, and the Honda CR-V, ranked fourth, averaged $37,364, nearly 23 per cent below the national average.

The share of vehicles selling for less than $40,000 increased in May compared to the previous year, suggesting a shift towards more affordable models. Vehicles priced below $40,000 accounted for 41.2 per cent of new-vehicle sales, up from 36.8 per cent in May 2023.

In the electric vehicle (EV) market, prices have seen volatility. Tesla’s average transaction price rose by 3.1 per cent month-over-month to $57,369 in May and was up 1.5 per cent year-over-year. Since January, Tesla’s ATP has increased by more than 10 per cent, partly due to growing Cybertruck sales, which averaged $108,667. Overall, EV prices increased in May, with the average EV selling for $56,648, up 2.6 per cent from April but down 4.1 per cent year-over-year.