Average New Car Price Actually Drops, but It's Still over $48,000

• What's this, an actual decline in the average new-vehicle transaction price (ATP)? Apparently, yes, said KBB, which reported that the ATP in March was down from the month before. It's been almost two years since that happened.

• The decline was only 1.1 percent, meaning the average price is still high, at just over $48,000. But it's the first sign that the relentless upward pricing pressure is starting to fade away.

• You can probably guess the reasons, which center on increased new-vehicle supply compared to the last few years of the global pandemic. And once shoppers have options, dealers can't use as many price-increasing tricks.

It's been a while—20 months, to be exact—but the average price of a new car is once again below the official sticker price. For almost two years now, the average new car price has kept climbing and climbing, assisted by plenty of dealer markups that regularly reminded us that car shopping is a perfectly good way to get frustrated on a Saturday. But, according to data from Kelley Blue Book, the average new-car buyer paid less than the sticker price in March. As KBB's Twitter account said, "Whew."

The average transaction price (ATP) for a new vehicle also dropped in March, down to a still-high $48,008. Compared to February, though, it's down 1.1 percent.

New-car prices started skyrocketing in the early days of the pandemic when supply-chain problems and strong demand pushed them up, and then they just sort of kept rolling. Back in the first quarter of 2021, for example, General Motors said its transaction prices rose by an average of $3500 per vehicle compared to the previous quarter. Before the pandemic, in 2019, the average prices were up $1800 compared to 2018, then went up another $3301 in 2020 and another $6220 in 2021.

The Return of Incentives

Here in 2023, the supply of new vehicles is climbing back up, and shoppers once again feel like they have some choice in what to buy. That is forcing manufacturers to once again offer up incentives, and KBB data said the average incentive discount last month was worth 3.2 percent of the transaction, for an average discount of $1,516. KBB said it saw average price drops at many dealerships, including Chevrolet, Chrysler, Dodge, Ford, Hyundai, Nissan, and Volkswagen.

"More vehicles on dealer lots—and on their competitors' lots—means dealers simply don't have the pricing power they did six months ago," Rebecca Rydzewski, research manager of economic and industry insights for Cox Automotive (which owns KBB), said in a statement.

Is a $50,000 Average Price Coming?

Where we go from here is the big question. The head of sales for Toyota North America, Jack Hollis, said in March that he expects new-car prices to top an average price of $50,000 sometime in 2023. That doesn't seem outlandish, given December's ATP of $49,501. Understanding how new vehicle prices are changing means breaking them down by category. The average new luxury vehicle, for example, cost $65,202 last month, effectively even with the February number. Prices for electric vehicles are headed up slightly, with an average price of $58,940 in March. It was $313 lower in February. The average price for a non-luxury vehicle in March was $44,182 and has been on a downward trend since January.

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