New car prices are finally falling. A little anyway.
Cars still sell for more than manufacturers’ sticker prices on average, but they’re at least closer, according to analysts. And a number of car brands are now being sold below sticker price, something that used to be normal but had become rare in the last year or more.
According to Ivan Drury, an analyst at Edmunds.com, new car prices averaged $700 over the manufacturer’s suggested retail price, or MSRP, in the first six months of this year. In recent months, however, prices have fallen to just about $230 above MSRP on average, according to Edmunds.
However, some car brands still strive for much more. Land Rover models still sell for $4,500 over sticker price on average, while Kia models sell for about $1,600 over sticker price. According to data from Edmunds.com, Hondas sell for about $1,360 above their suggested retail price, on average.
In general, buyers who buy non-luxury mainstream vehicles tend to pay more than luxury car buyers, according to analysts at Cox Automotive. While luxury car buyers, who make up about 17% of the market, are still paying higher prices, overall — $66,000 compared to an average of $44,000 for non-luxury brands — they’re at least paying closer to the badge. The slight difference in price premiums may reflect the fact that non-luxury cars in many cases have similar appointments and features to luxury cars, said Cox spokesman Mark Schirmer. Retailers are now simply demanding that customers pay for what the product actually offers, rather than a lower price dictated by the manufacturer. He added that luxury car dealers may place more emphasis on customer experience and therefore be less aggressive in pricing than mainstream dealers.
Overall, Cox’s auto price analysts show that buyers pay an average of $527 more than stickers. That’s higher than Edmunds claims, but also lower than at the start of the year. (The difference has to do with analysis methods and specific data sources, according to spokespersons from both companies.)
Dealers who ask customers to pay one above the sticker price for a car are usually considered unusual, which is only the case with highly desirable or hard-to-find models such as high-performance sports cars. Over the past 17 months, however, vehicle inventory shortages have allowed car dealers to push prices above MSRP, according to Cox Automotive. Unlike most things, car prices are usually negotiated individually by dealers, resulting in broad pricing flexibility. Production delays due to supply chain problems — car companies have struggled to get some parts like computer chips — have meant there are few cars for sale, and that has given auto dealers tremendous bargaining power.
Some manufacturers, like Ford and Honda, have noticed customers’ willingness to deal with low inventories, higher prices, and longer waits to receive their vehicles. Executives at those companies have said they have no plans to ever go back to the days when dealer lots were filled with cars and SUVs waiting to be sold.
Although vehicle inventories are still tight, particularly for some manufacturers like Honda, they are at their highest levels since June 2021, according to Cox.
“If consumers are flexible about make and model, then it will be possible to get a good deal at year-end sales events,” said Rebecca Rydzewski of Cox Automotive.
According to Edmunds, some large SUVs like the Lincoln Navigator and Volvo XC90 sell for relatively large discounts of $1,400 and $1,900 under the sticker, on average. Volvo and Lincoln are generally the two car brands offering the biggest discounts off MSRP, according to Edmunds data. Buick is another brand that offers pretty big discounts, according to Cox.
In terms of new auto loans, customers can now get pretty good interest rates on shorter 36- to 48-month loans, Drury said. Of course, these shorter loan terms translate into higher monthly payments, but with the benefit of allowing buyers to save thousands of dollars in interest, especially when interest rates are rising. The Federal Reserve is expected to continue raising interest rates, which in turn may push up interest rates on things like auto loans. A person’s own credit rating has the biggest impact on how much auto lenders charge, but there are still good financing deals out there for the well-qualified. according to bankrate.com. Offers of 0% interest surged earlier this month, according to a report by Cox Automotive.
Used-car prices are also starting to drop somewhat, which could bring new-car buyers back into the market, Drury said.
“Consumers who have been waiting on the sidelines to watch their trade-in appreciate will now feel the need to act if they want to get the maximum trade-in value out of their vehicle,” he said.
With inflation and high gas prices, owners of cheaper, more fuel-efficient models are getting the best value for their trade-ins, Cox Automotive analyst Brian Finkelmeyer wrote in a recent report. However, those dealing in larger, more expensive vehicles might be disappointed.
“Used car inventories across the country are currently bloated with expensive used items priced in excess of $35,000,” he wrote.
It will be a long time before shopping gets back to what it used to be, with shoppers able to negotiate deep discounts on most vehicles, Edmunds’ Drury said. That won’t happen before the end of 2023 or even 2024, he said.