Americans can again buy cars for less than sticker prices. But that doesn’t mean they’re finding bargains at their local dealerships.
A year ago, inventory was so tight on record that 80% of buyers were above manufacturer’s suggested retail price (MSRP). sticker price, according to Edmonds data. For decades, car buyers have been able to negotiate discounts.
Currently, only 36% of buyers pay for stickers or more. Buyers who averaged $700 above MSRP in the spring paid an average of $300 less than stickers in December.
That’s still well below the average $2,600 buyers saved on sticker prices in 2019, according to Edmunds data, but the average transaction price is at a record high, according to data from both Edmunds and Cox Automotive. is maintained. , price and stock.
That brings the average transaction price in December to just under $50,000, up about $10,000 (26%) from December 2019, just before the pandemic disrupted the new car market.
The auto industry inventory shortage that began in early 2021 was caused by parts shortages. computer chip. The crisis meant that cars and trucks were being sold even before they reached dealers.
Since then, parts and new vehicle inventories have started to improve. Auto dealer lots are fuller than he was a year ago — Cox estimates that new car supply has increased by 800,000 units, or 83%, since the beginning of 2022 — but that’s still a long way from the past. More than 1 million units below inventory levels.
Automakers have focused on using the growing supply of chips and other components to build more expensive and profitable models such as big SUVs, pickups and the latest EVs. as a waiting list for buyers).
Cheaper models such as compact sedans are still very much in short supply as Stellantis, the parent company of General Motors, Ford and Chrysler, has more or less exited these markets. Asian auto makers, which still make low-end models, are also among the tightest.
“Find a Civic,” said Michelle Krebs, senior analyst at Cox.
Used car prices have fallen so sharply in the last six months that even if buyers are now paying less than stickers, the prices of cars they trade in are also falling.
Without the tight inventory that drove new-car buyers to the used-car market, used car price The consumer price index, the government’s main inflation indicator, has fallen about 9% over the past year. According to Edmunds data, prices for vehicles over 5 years old have dropped by about 15%. This means that trade-in prices have fallen by about $3,000, or 11%, since their peak in June.
What’s more, as the Federal Reserve hiked interest rates to keep inflation in check, interest rates rose sharply, prompting buyers to push record-high car payments, including the longest loan term ever, to push cars off the market. must be done. a lot.
There are signs that things will turn around for new car buyers in the coming months as inventories continue to build. This gives buyers more chances to negotiate again. Data show that the incentives offered to attract buyers had virtually disappeared, but are rising again.
“Inventory is trending upwards, which may provide some easing in pricing,” said Zack Krelle, industry analyst at TrueCar.
Unfortunately, the biggest potential driver for prices could be an economic downturn due to job losses and rising unemployment. This could lead to a significant drop in demand, leading to lower prices. But given pent-up demand from buyers who have waited on the sidelines for the past few years, prices may not fall as much as they have in past recessions, Claire said.