Falling new car prices mean most buyers are paying less than a sticker

Americans can once again buy cars below the recommended price.  The photo shows the showroom of the Highlands Ranch dealership.

Chris Isidore, CNN

Americans can once again buy cars below the recommended price. But this does not mean that they find great deals in local dealerships.

A year ago, record-breaking inventory meant that 80% of shoppers were paying more than the manufacturer’s suggested retail price (MSRP) or list price, according to Edmunds data. For decades, car buyers have been able to negotiate a discount.

Today, only 36% of shoppers pay above stickers. In the spring, after paying an average of $700 more than the suggested retail price, shoppers paid an average of $300 less than they did in December.

According to Edmunds, that’s still far less than the $2,600 average price tag buyers saved on the 2019 price tag, while the average transaction price remains at an all-time high, according to both Edmunds and Cox Automotive, which track car sales. , prices and stocks.

As a result, the average deal price in December was just under $50,000, up about $10,000, or 26%, from December 2019, just before the pandemic upended the new car market.

Inventory Upgrade

The shortage of inventories in the automotive industry, which began in early 2021, was caused by a shortage of spare parts, primarily computer chips. This crisis meant that cars and trucks were being sold before they even hit dealerships, so if one didn’t want to pay above the sticker, there was no shortage of buyers who were willing.

Since then, the range of parts and new vehicles has begun to improve. Car dealerships are more full than a year ago – Cox estimates new car supply has increased by 800,000, or 83%, since the start of 2022 – but that’s still more than 1 million vehicles below historic inventory levels.

Automakers have focused on using the increased supply of chips and other parts to build their more expensive and more profitable models, such as large SUVs and pickup trucks, as well as hot new electric vehicles that have a high intrinsic price (and also as a waiting list for buyers).

Cheaper models like compact sedans are still very scarce, especially after General Motors, Ford and parent company Chrysler Stellantis have more or less pulled out of those markets. Asian automakers, which are still making cheaper car models, also have some of the most limited inventory.

“Just try to find a Civic,” said Michelle Krebs, senior analyst at Cox.

Even if today’s buyers are paying less than usual, they are also getting less for the cars they sell, as the value of used cars has plummeted over the past six months.

According to the CPI, the government’s key measure of inflation, without inventory cuts that have attracted new car buyers to the used car market, used car prices have fallen about 9% over the past year. According to Edmunds, prices for cars older than five years have dropped by about 15%. This means that the value of trade-ins fell by about $3,000, or 11%, just after the peak in June.

In addition, interest rates have risen sharply as the Federal Reserve has raised rates in an attempt to control inflation, and buyers have to fork out record high car payments, including the longest loan terms ever, to drive cars off the market. many.

There are signs that the situation for new car buyers will improve in the coming months as inventories continue to rise. This will give buyers more chances to haggle again. Incentives offered to attract shoppers that have all but disappeared are rising again, according to the data.

“Stocks are on an upward trajectory. This paves the way for some price cuts,” said Zach Crelle, industry analyst at TrueCar.

Unfortunately, the biggest factor that could help prices could be a downturn in the economy with rising unemployment and unemployment. This is likely to significantly reduce demand and help drive prices down. But prices may not fall as much as in past recessions, given the pent-up demand from buyers who have been on the sidelines for the past few years, waiting for an opportunity to buy, Crelle said.

The-CNN-Wire
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The “New Car Price Drop” message means that most buyers are paying less than the sticker that first appeared on the KION546.

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