Consumers Paying Less — Again — for New Vehicles in 2024

The average transaction price for a new car, truck or SUV in May dropped slightly from April. The ATP dropped in the first three months of 2024, before jumping 2.2% in April. However, incentives are on the rise again, helping to drive down what buyers are paying.

ATP is what a person pays for a new vehicle after all rebates and incentives are factored in. It’s typically less than the manufacturer’s suggested retail price, or MSRP.

Last month, according to estimates by Kelley Blue Book, the average transaction price (ATP) for a new vehicle in the U.S. was $48,389, statistically unchanged from the downwardly revised price of $48,368 in April. The new-vehicle ATP in May was lower year over year by 0.9%, approximately $442.

On the decline

The U.S. market continues to normalize, much of that due to automakers finally getting new vehicle inventory levels close to pre-pandemic numbers. New vehicle inventory at the beginning of May was about 2.84 million, according to industry estimates. That’s right around the 3 million typically on hand.

Now that consumers have options, they can be more selective. This has automakers returning to form when it comes to incentives.

The higher the incentive levels, the more affordable new vehicles become. In May, the average new-vehicle incentive package was 6.7% of the average transaction price, according to Kelley Blue Book estimates. That’s an increase from April and the highest level since May 2021.

Incentives in May were approximately $3,200, notably higher than one year ago when discounts were measured at 4% of ATP.

What’s affordable?

“In May, we saw some positive news on the sales front,” said Erin Keating, executive analyst for Cox Automotive. “A lot of those sales gains were juiced by higher incentives and lower prices, which is good news for consumers worrying about inflation.

“While there are a lot of vehicles transacting at very high prices, that doesn’t mean all new vehicles are unaffordable. There are still plenty of excellent, well-priced vehicles out there, particularly in the compact segments.”

In short, even though the ATP is high, part of that is due to the fact that there are a slew of pricey vehicles on the market, driving the number up. Of note, pickup trucks skew the average upward because they’re expensive and them occupy the top four sales slots.

The Ford F-Series, Chevrolet Silverado, Ram Pickup and GMC Sierra posted ATPs above $60,000, with the GMC Sierra — No. 7 in the top 10 list — above $70,000. The best-selling vehicle in the U.S. last month, the popular Ford F-Series pickup, had an average price near $68,000.

Not all bad

Although the pickup trucks push prices higher, five of the top 10 most popular vehicles transacted at prices below $40,000 and well below the Kelley Blue Book average transaction price for the industry — $48,389.

Some of those vehicles include the Toyota RAV4, which is the third most popular vehicle in the U.S., with transaction prices averaging $37,608. No. 4 Honda CRV had an ATP in May of $37,364, almost 23% lower than the national average.

“It’s called an average for a reason,” added Keating. “The U.S. market is very diverse, with plenty of popular, high-priced vehicles that sell very well and drive the average higher.

“The popularity of fully loaded, full-size pickup trucks that are more luxurious than many luxury vehicles is unique to the U.S. market. The Ford F-Series outsold BMW 2-to-1 in May, and BMW’s ATP was only marginally higher than the F-Series.”

The rise in sub-$40K vehicles last month compared to year-ago numbers, suggests more change may be coming in the market. For those looking to spend less, the change may be a good one, Cox officials noted.

Vehicles transacting below $40,000 accounted for 41.2% of new-vehicle sales in May, up from 36.8% one year ago. Kelley Blue Book counted approximately 70 different models available for below $40,000. Only one model with meaningful sales volume — the Mitsubishi Mirage — transacted below $20,000.