New car prices are finally falling. But not by much
New car prices are finally falling. A bit though.
Cars still sell, on average, for more than manufacturers’ list prices, but at least they’re closer, analysts say. And a number of car brands are now selling for less than the sticker price, which was once normal but has become rare over the past year or so.
For the first six months of this year, new car prices averaged $700 above the manufacturer’s suggested retail price, or MSRP, according to Edmunds.com analyst Ivan Drury. In recent months, however, prices have fallen to around $230 off MSRP, on average, according to Edmunds.
However, some car brands go much further. Land Rover modelson average, still sell for $4,500 above the list price while Kia Models sell for about $1,600 more than the list price. Hondas sell for about $1,360 more than their suggested retail price, on average, according to data from Edmunds.com.
In general, buyers who buy non-luxury mainstream vehicles tend to pay more than buyers of luxury cars, according to analysts at Cox Automotive. While luxury car buyers, who make up about 17% of the market, still pay higher prices, overall – $66,000 compared to an average of $44,000 for non-luxury brands – they were paying at least closer to the mark. ‘sticker. The slight difference in price markups may reflect the fact that non-luxury cars, in many cases, have similar appointments and features as luxury cars, Cox spokesman Mark Schirmer said. . Dealerships now simply require customers to pay for what the product actually provides rather than a lower price dictated by the manufacturer. He added that luxury car dealerships may place more value on the customer experience and, therefore, be less price aggressive than traditional dealerships.
Overall, Cox auto pricing analysts show buyers are paying an average of $527 off the sticker. That’s higher than Edmunds claims but, again, lower than at the start of the year. (The difference has to do with analysis methods and specific data sources, according to spokespersons for the two companies.)
Dealerships asking customers to pay more than the list price for a car are normally considered unusual, which is only done for particularly desirable or hard-to-find models like high-performance sports cars. Over the past 17 months, however, according to Cox Automotive, out of stock vehicles allowed auto dealers to push prices above MSRP. Unlike most things, car prices are usually negotiated individually by dealerships, which allows for a lot of pricing flexibility. Manufacturing slowdowns caused by supply chain issues – automakers have struggled to get certain parts, like computer chips – have meant few cars are available for sale, giving dealers automobiles enormous bargaining power.
Some automakers, like Ford and Honda, have noticed customers’ willingness to deal with low inventory, higher prices and longer wait times to get their vehicles. Executives at these companies said they never plan to return to the days when dealership lots were filled with cars and SUVs waiting to be sold.
Although still tight, especially for some automakers like Honda, vehicle inventories are at their highest level since June 2021, according to Cox.
“If consumers are flexible about make and model, it will be possible to find a bargain at year-end sales events,” said Rebecca Rydzewski, for Cox Automotive.
Some large SUVs like the Lincoln Navigator and Volvo XC90 are selling for relatively deep discounts of $1,400 and $1,900 below the sticker, on average, according to Edmunds. Volvo and Lincoln, in general, are the two car brands with the biggest MSRP discounts, according to Edmunds data. Buick is another brand offering fairly deep discounts, according to Cox.
In terms of new auto loans, customers can now get pretty good interest rates on short-term loans of 36 to 48 months, Drury said. These shorter loan terms mean higher monthly payments, of course, but with the added bonus that buyers can save thousands of dollars in interest, especially with rising interest rates. The Federal Reserve should continue to raise its benchmark rate, which may, in turn, drive up interest rates on things like auto loans. An individual’s credit rating has the biggest impact on how much auto lenders charge, but there are still good financing deals available for well-qualified individuals. according to Bankrate.com. 0% interest rate offers rose sharply earlier this month, according to a report from Cox Automotive.
Used car prices are also starting to drop a bit, which could entice new-car buyers back into the market, Drury said.
“Consumers who have been waiting on the sidelines watching their trade-in appreciate will now begin to feel the need to take action if they are to extract the maximum trade-in value from their vehicle,” he said.
With inflation and high gas prices, owners of cheaper, fuel-efficient models will get the best values for their trade-ins, Cox Automotive analyst Brian Finkelmeyer wrote in a recent report. Those selling larger, more expensive vehicles, however, might be disappointed.
“Used car inventories across the country are currently bloated with expensive used goods priced above $35,000,” he wrote.
it’s gonna be a long wait before shopping goes back to how it used to be, with buyers able to negotiate deep discounts on most vehicles, Edmunds’ Drury said. It won’t start until late 2023 or even 2024, he said.