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September 01, 2020 1:29pm
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Price drop: People are paying less than MSRP for new cars again

Incentive spending is up as new vehicle inventories improve, which helped drive the average transaction price paid for a new vehicle below MSRP in April.

The money is back on the hood.

New car sales are rising again, but prices are holding steady thanks in part to an increase in purchase incentives.

The average transaction price paid for a new car in April was $48,275, according to Kelley Blue Book.

That is down just $14 compared to March, but marks the second straight month the average price paid was below the average sticker price.

THERE ARE ONLY 3 NEW VEHICLES PRICED UNDER $20,000 NOW

New vehicle shoppers in April paid an average of $378 below the manufacturer's suggested retail price (MSRP), compared to $600 above MSRP a year ago.

Growing inventories led automakers to offer incentives averaging $1,714, the highest they have been in a year.

"New-vehicle transaction prices are trending downward in 2023, which should feel like a breath of fresh air to buyers following the last few years of low supply and rapidly rising prices," said Rebecca Rydzewski, research manager of Economic and Industry Insights for Kelley Blue Book owner Cox Automotive.

"Now that inventory levels are starting to climb and manufacturers are increasing incentives, the market will respond accordingly. High auto loan interest rates are still a major issue for many buyers, but inventory and price trends are a positive in the market right now."

LAMBORGHINI'S RECORD SALES CONTINUE INTO 2023 THANKS TO SUVS

Luxury vehicle prices dropped $1,605 from March to April to an average of $64,144, which is the lowest they have been in 11 months, while electric car prices fell $4,464 to $55,089.

"April's downward movement of EV average transaction prices reflects EV automakers, particularly Ford and Tesla, seeking a balance between pricing and profitability," said Michelle Krebs, executive analyst at Cox Automotive.

"With average EV prices trending lower, we are seeing EV sales increase. For example, EV sales estimates in April were up by 26% year over year."

Rydzewski said the pricing trend is expected to continue.

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"Buyers can benefit significantly from manufacturers increasing incentives, including special low APR financing to help keep new auto loan rates attractive. As supply continues to increase, industry average incentives are likely to go up as well."

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