Dive Brief:
- Consumers are struggling to afford new vehicles despite falling prices, according to a Cox Automotive report released Monday.
- The average transaction price of a new vehicle in the U.S. was $47,244 in February, declining less than 0.1% month over month and 2.2% year over year.
- However, prices are nearly 14% higher than in February 2021, when they began to climb, making vehicles less affordable.
Dive Insight:
Larger inventories, lower prices, and higher incentives, such as low financing rates, are making new vehicles more affordable than they have been in the past couple of years.
Last month, Cox Automotive and Moody’s Analytics found the average payment declined from $775 in December to $751 in January, falling 3.2% month over month.
But interest rates remain elevated, and consumers are having more difficulty accessing credit than they have since August 2021.
“While everyone may applaud that prices are coming down, even marginally for the moment, affordability is still challenging the market,” said Erin Keating, executive analyst for Cox Automotive, in a statement. “Most shoppers have not seen their incomes increase as quickly as vehicle prices, so affording a new vehicle remains difficult.”
Automakers are also selling more luxury vehicles to protect profitability as prices fall.
The number of models with transaction prices below $25,000 dropped from 29 in February 2021 to nine last month, Cox Automotive found. Only two vehicles — the Kia Rio and Mitsubishi Mirage — had average transaction prices below $20,000 in February. Both vehicles, however, will no longer be available since the Rio will not return for the 2024 model year, and U.S. production for the Mirage will end in late 2025.
Meanwhile, mainstream brands sold 30 models with average transaction prices above $100,000. Automakers sold more than 81,000 vehicles with transaction prices above $75,000 and fewer than 52,000 with transaction prices below $25,000.
In addition, average transaction prices for EVs fell 12.8% year over year to $52,314, mainly due to lower Tesla Model 3 and Model Y prices.
“Our research continues to show that price remains a significant barrier for consumer adoption,” said Stephanie Valdez Streaty, director of industry insights at Cox Automotive, in a statement. “While the higher inventory levels and increased competition continue to drive down the price premium of EVs, it’s important to acknowledge that EVs remain priced above mainstream non-luxury vehicles by nearly 19%.”
