New car prices in the U.S. market are presenting a complex picture in July, according to the latest data from Kelley Blue Book. While average transaction prices (ATP) have slightly decreased year-over-year for the tenth consecutive month, reaching $48,401, incentives for new vehicles have surged to 7.0% of the transaction price – the highest level in over three years. This shift indicates a market adjusting to increased inventory but still grappling with affordability challenges for consumers.
Kelley Blue Book, a trusted source for car valuation and automotive insights for nearly a century, reveals that July’s ATP is marginally lower than June’s revised figure of $48,424 and slightly below last year’s price by $106. Significantly, new-vehicle ATPs are down 3.1% from their peak of $49,929 recorded in December 2022, as per Kelley Blue Book data. This downward trend is largely attributed to healthier inventory levels across dealerships.
The automotive industry entered July with a robust 2.91 million vehicles in inventory, a substantial 52% increase compared to the previous year, according to Cox Automotive’s vAuto Live Market View. This inventory surge is a primary factor applying downward pressure on car prices. However, the benefit of lower prices is somewhat offset by persistently high auto loan interest rates. These elevated rates are making monthly payments more expensive, causing many potential buyers to either postpone purchases or seek more budget-friendly vehicle options. Notably, the Mitsubishi Mirage, slated for discontinuation at the end of the year, was the only new vehicle with an ATP under $20,000 in July, highlighting the shrinking availability of truly budget-friendly new cars.
Despite the overall market trends, consumer preferences are shaping specific segment dynamics. Compact and Subcompact SUVs remain highly sought after, representing approximately 25% of all sales in July. These segments offer more accessible price points, with ATPs of $36,621 and $29,827 respectively, both considerably below the industry average. Furthermore, incentive levels in these SUV categories are above the industry average, making them attractive options for value-conscious buyers.
Conversely, the strong sales of full-size pickup trucks are contributing to keeping the industry’s overall ATP higher. Expensive full-size pickups accounted for 14% of July sales, with an average transaction price of $65,713. Interestingly, incentives for full-size pickups are also elevated at 8.1% in July, exceeding the industry average, suggesting manufacturers are using incentives even in this typically high-profit segment to maintain sales momentum.
The Ford F-Series and Chevrolet Silverado, the two top-selling vehicles in the U.S. in July, are both full-size trucks, further emphasizing the segment’s influence on ATP. The F-Series had an ATP exceeding $67,000, while the Silverado ATP was over $60,000. In the electric vehicle (EV) sector, high-end pickups like the GMC Hummer EV Pickup and Tesla Cybertruck both transacted above $100,000 in July, demonstrating the diversity within the market and the range of price points available to consumers.
Erin Keating, executive analyst at Cox Automotive, the parent company of Kelley Blue Book, points out the nuanced nature of the U.S. auto market: “The thing about the U.S. is its diversity, and that goes for the U.S. auto market as well. There are many expensive, high-profile vehicles out there, but consumers have many good options priced well below industry average. We hear this from the large dealers all the time: No matter the budget, chances are we can make something work. This is particularly true where inventory is higher, and incentives are following.” This quote underscores the availability of options across different price ranges, even within the current market conditions.
Incentives See Significant Growth
The average incentive offered on new vehicles in July reached 7.0% of the ATP, equating to $3,383. This represents an increase from 6.4% in June and marks the most generous incentive levels seen so far in 2024. Compared to July 2023, incentives are up by a substantial 59.1%, when the average incentive package was 4.4% of ATP. Current incentive levels are the highest they have been in over three years, offering potential savings for car buyers.
Almost every major automotive brand, with the exception of Ram, has increased incentive spending year-over-year in July. Brands like Infiniti, Volkswagen, Audi, and Nissan are among the volume automakers with the highest incentive spending. Interestingly, despite having strong inventory levels, Stellantis brands Chrysler, Dodge, Jeep, and Ram are still offering incentives below the industry average.
Keating further explains, “Not every brand is seeing sky-high days’ supply, but, in most cases, where there is excess, incentives are climbing. The higher incentives are helping consumers, but stubbornly high interest rates and tighter credit conditions continue to make affordability challenging. If we are going to see the market live up to its potential, we will need to see rates lower, and credit loosen.” This highlights the interplay between incentives and broader economic factors affecting car buying affordability.
EV Incentives Outpace Industry Average While Prices Stabilize
In the electric vehicle market, the average transaction price in July was $56,520, showing a slight increase from June but a 1.5% decrease compared to last year. EV incentives are particularly noteworthy, averaging over 12% of the transaction price in July. This is the highest level in more than three years and roughly double the 6.0% seen in July 2023. EV incentives are now 73% higher than the overall industry average, making EVs more attractive through substantial discounts.
Tesla’s average transaction prices are on an upward trend after falling to near the industry average in December 2023. In July, Tesla ATPs reached $59,593, an 11% increase from a year ago and the highest point since February 2023. The success of the Cybertruck is likely contributing to this price increase, although even volume models like the Model 3 and Model Y have seen price increases throughout the year. The Model Y’s ATP in July was $52,055, up 5% from January, while the Model 3 saw a remarkable 30% increase from January to $53,878. The Model Y and Model 3 remain the top-selling EVs in the U.S. market, indicating strong demand despite price fluctuations.
In conclusion, the U.S. new vehicle market, as analyzed by Kelley Blue Book data, presents a mixed landscape. While new car prices are showing signs of softening and incentives are on the rise, offering some relief to consumers, high interest rates and tight credit continue to pose significant affordability challenges. The increased incentives, particularly in segments like compact SUVs and for electric vehicles, signal opportunities for savvy buyers, but the overall market’s full potential hinges on broader economic factors improving consumer access to affordable auto financing.
Data tables with detailed figures are available for download from Cox Automotive.
About Kelley Blue Book
For nearly a century, Kelley Blue Book has been The Trusted Resource® for vehicle valuation and automotive information. Serving both consumers and the automotive industry, Kelley Blue Book provides transparent, objective data and innovative tools. Millions rely on KBB.com each week for market-reflective values, including the renowned Blue Book® Trade-In Values and the Kelley Blue Book® Price Advisor tool. Kelley Blue Book editors offer expert reviews and ratings of hundreds of new vehicles annually, guiding consumers towards making informed car-buying decisions. Kelley Blue Book is a Cox Automotive brand, leveraging the vast resources of the world’s largest automotive services and technology provider to deliver unparalleled insights into the car market.
