Car buyers have been through a whirlwind of low inventory and high prices in recent years.Even as prices improve, there was only one car model sold below $20,000 in July.But experts say the auto retail market might finally be stabilizing.
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It used to be relatively easy to find a vehicle under $20,000. Today, that’s not the case, but experts say buyers might see some relief from sky-high car prices soon.
The only car model that sold below $20,000 last month was the Mitsubishi Mirage, transacting for an average $19,205, according to Kelley Blue Book. That used to be rare in the auto retail world: In 2018, around a dozen new vehicles could be bought for less than $20,000. But small cars like the Toyota Corolla, Nissan Versa, and Kia Rio are even transacting over that threshold now.
Meanwhile, automakers are abandoning the “starter car” — or entry-level vehicles — in lieu of high-margin, often luxury, trucks and SUVs. There were 32 vehicles going for more than $100,000 in July (not including super exotics, mind you), more than two-and-a-half times the 12 vehicles in that $100,000+ category five years ago.
Now, it’s challenging to find a ride in the $20,000 price range even if a shopper is considering used.
Relief may be on the horizon, auto buying experts say
Prices might not be dropping dramatically, but at the very least, they’re stabilizing.
July saw the smallest increase in average transaction price (ATP) from a year earlier in a decade, per Kelley Blue Book. From July 2022 to last month, ATPs were relatively flat, increasing less than 1%.
Now, new cars were still going for a whopping $48,334 on average, but buyers won’t be seeing the same levels of inflation that they might have a year ago.
It largely depends on the brand
While things marginally improve, there are still a lot of vehicles that have exceptionally high dealer markups above sticker prices. Very few cars are priced anywhere below Manufacturer’s Suggested Retail Price.
Some automakers are starting to bring back incentives to get inventory off dealer lots.
A few brands know they might not ever have an excess of inventory again, so there is little reason to offer deals. But other retailers are paying a lot to have cars sit there (something they haven’t been used to since COVID had many of their lots bare).
In July, car companies averaged $2,148 in incentives (about 4.4% of the ATP), per Kelley Blue Book. That’s substantially down from the deals shoppers could have gotten pre-pandemic, but it’s a sign things keep moving in the right direction.
This is at a time when interest rates are through the roof, monthly car payments are at a record high, and more and more auto loan applicants are getting rejected. Car shoppers are in desperate need of relief.
“New-vehicle price inflation has all but disappeared in 2023,” Rebecca Rydzewski, Cox Automotive research manager, said in a release. “With higher inventories and higher incentives helping to keep downward pressure on prices, there certainly are good reasons for shoppers to be heading back into the market.”
EVs, especially, are dropping in price. They hit $53,469 in July, down nearly 18% less from $65,108 one year ago, per Kelley Blue Book. A combination of the ongoing EV price war and increasing inventory have these costs coming down, a good sign for consumers.
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