The average price Americans paid for a new vehicle in March 2024 remained largely stable, experiencing a minor decrease of 1% compared to February, according to Kelley Blue Book’s latest analysis. Last month, the Average New Car Price settled at $47,218, marking a 1% decrease from March 2023 and a 5.4% drop from the peak prices observed in December 2022. Despite these decreases, new vehicle prices are still significantly higher, sitting 15.5% above the prices seen in March 2021.
A key factor influencing the automotive market and contributing to these price adjustments is the substantial recovery in vehicle supply. At the beginning of March, the new-vehicle inventory across the U.S. reached approximately 2.74 million units. This represents a considerable 52% increase compared to the inventory levels of the previous year. While sales experienced a month-over-month dip in March, the seasonally adjusted annual rate (SAAR) of sales reached a healthy 15.5 million. This sales pace positions 2024 as potentially the strongest year for new-vehicle sales since 2019.
“The industry should welcome a 15.5 million new car SAAR as it indicates healthy consumer demand, who are benefiting from improved affordability thanks to increased vehicle supply and significantly higher incentives compared to last year,” noted Erin Keating, executive analyst for Cox Automotive. “However, it’s important to remember that persistent high interest rates and overall inflation, coupled with a continuing shortage of entry-level vehicles, will likely continue to create affordability challenges for many prospective car buyers.”
Impact of Rising Incentives on New Car Prices
Automakers are increasingly using incentives to attract buyers in the current market. In March, the average incentive offered by manufacturers rose by 11% to $3,121. This figure represents a substantial 102% increase compared to the incentives offered in March of the previous year and marks the highest incentive level since May 2021. As a percentage of the average transaction price (ATP), incentives reached 6.6% in March, up from 5.9% in February and more than double the 3.2% average recorded in March last year. Incentives have been steadily growing since reaching a low point of 2.1% of ATP in September 2022, mirroring the recovery in vehicle inventory.
Incentive strategies differ between vehicle segments. Luxury vehicles continue to benefit from more generous incentives compared to non-luxury vehicles. The average luxury vehicle incentive in March was 7.5% of ATP, slightly down from February but still more than twice the level of a year prior. The average transaction price for a luxury vehicle in March was $62,067, showing a decrease from February. Non-luxury vehicle incentives averaged 6.4% of ATP in March, an increase from 3.8% in February. The average price paid for a non-luxury vehicle in March was $44,083, down from February’s estimated price of $44,548.
A growing number of automakers are offering substantial incentive packages. In March, more manufacturers provided incentives exceeding 10% of the average transaction price compared to February. Kelley Blue Book estimates indicate that the highest incentives were offered by Polestar, Lucid, Tesla, Infiniti, Mini, Nissan, and Volkswagen. Conversely, only three automakers – Land Rover, Porsche, and Toyota – had incentives at or below 3.2% of ATP, which was the average incentive level a year ago. Land Rover’s incentives were estimated to be particularly low, averaging just 2.4% of ATP. Despite these low incentives, the average price for a new Land Rover still exceeded $101,000 last month.
Fewer Affordable New Vehicle Choices for Consumers
The ongoing industry trend towards a vehicle mix favoring luxury models is making new vehicle ownership increasingly challenging for the average consumer seeking affordable options. In March, out of approximately 275 new-vehicle models available in the U.S. market, only eight had average transaction prices below $25,000. Alarmingly, only two models transacted for less than $20,000. The Kia Rio and Mitsubishi Mirage, both discontinued models, remained the two most budget-friendly vehicles in the U.S. last month. This starkly contrasts with March 2021, when over 20 vehicle models routinely had transaction prices below $25,000, with seven of those models even falling below the $20,000 price point.
Conversely, the high end of the market is thriving. Last month, 30 different vehicles recorded average transaction prices exceeding $100,000, with the Mercedes-Benz G-Class leading the pack at an ATP of $208,663. Kelley Blue Book’s March data reveals a significant trend: more vehicles in the U.S. are sold at prices above $75,000 (over 81,000 sales) than below $25,000 (nearly 52,000 sales). According to the latest Cox Automotive/Moody Analytics Vehicle Affordability Index, new-vehicle affordability has improved for consumers, reaching its best level in 31 months. However, despite this improvement, affordability remains considerably worse than it was in 2019. (It’s important to note that Kelley Blue Book’s estimates exclude ultra-luxury brands such as Ferrari, Lamborghini, and Rolls-Royce.)
Electric Vehicle Prices Show Increase in March
Data on electric vehicle (EV) transaction prices indicates a slight upward trend in March. The average price paid for a new EV in the U.S. in March was $54,021, up from a revised $53,707 in February, based on Cox Automotive and Kelley Blue Book estimates. However, when comparing year-over-year, EV transaction prices in March were 9.7% lower than the previous year. This follows a similar trend in February, where prices were 10.5% lower year-over-year.
“Lower EV prices have been a key factor in supporting EV sales volume in the U.S., particularly for popular Tesla models,” stated Stephanie Valdez Streaty, director of Industry Insights at Cox Automotive. “The average transaction price for a new EV decreased by 9.0% in the first quarter of this year compared to the first quarter of 2023, and also dropped 3.8% compared to the previous quarter. Despite these price reductions, as highlighted in our Q1 EV sales report, lower EV prices have not yet translated into significantly higher sales volumes overall.”
After experiencing a period where Tesla’s price cuts largely drove down overall EV prices, the general EV market saw price increases in March. This shift is partly attributed to price increases for the Tesla Model 3. The transaction price for the Model 3 in March was $46,169, reflecting a 5.6% decrease year-over-year but a 6.7% increase month-over-month. Incentives for the Model 3 were 8.2% of ATP, equating to $3,778. Tesla’s overall incentives averaged 11.8% of ATP in March, but they were not the highest among EV manufacturers. Polestar offered the highest EV incentives in March at 14.4% of ATP, followed by Lucid at 13.6%. These substantial incentives and discounts across most EV models continue to be a significant factor in keeping EV prices lower compared to previous periods.
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*An earlier version misstated the month as February.
