[Uber Wagon]

It actually fell a little thanks to measly little incentives!

TL;DR

The average new car in America sold for $48,763 in February 2023 – a decline of 1.4% from January’s figure.
It’s still 5.3% higher than a year ago. But it’s the third straight month of decreases – a sustained price drop according to the analysts at Kelley Blue Book.
Economic conditions have pushed prices higher for two years, but so have Americans’ choices. In February 2023, the average luxury buyer paid $65,534 for a new vehicle. Luxury vehicles made up almost 20% of sales early in 2023 – a historic high. They fell slightly in February – making up 19.5% of all new car sales.

This is a follow up thread to my previous Old Man Rant thread from 2021.

The average new car in America sold for $48,763 in February – a decline of 1.4% from January’s figure.

It’s still 5.3% higher than a year ago. But it’s the third straight month of decreases – a sustained price drop.

The average new car sale included $1,474 worth of incentives – a level not seen since last March.

Incentives Are Back
Incentives reached a 10-month high in February 2023, increasing to 3.0% of the average transaction price, compared to 2.8% in January.

Incentives remain at a historically low level. For comparison, in February 2021, Kelley Blue Book estimates incentives averaged 8.3% of the average transaction. Luxury cars had the highest incentives in February at 6.5% of the total price. Meanwhile, vans had the lowest incentives, with less than 1%.

Still Over Sticker, But Oh-So-Close
The average new car has sold for more than its list price for more than a year. That was true last month, but barely – the average sale price was just $95 over sticker. Another month of decreases will almost certainly drive it under.

“The transaction data from February indicates that prices continue a downward trend at the beginning of 2023,” said Rebecca Rydzewski, research manager of economic and industry insights for Cox Automotive. “Both luxury and non-luxury prices were down month over month, but new models, richer product mix, and limited discounting are contributing to elevated prices.”

Cox Automotive is the parent company of Kelley Blue Book.

Non-Luxury Prices Dropping
The average non-luxury car sold for $44,697 – a decline of $681 compared to January. Most non-luxury brands – including Chrysler, Dodge, Ford, GMC, Hyundai, Mazda, Subaru, and Volkswagen – saw price declines between 0.2% to 3.9% month over month in February.

This correlates with higher incentives helping to push prices down. Kia and Honda dealers were the hardest places in the non-luxury market to find a deal last month. In February, they sold cars for between 4% and 6% over sticker price.

Americans Still Buying Lots of Luxury Cars
Economic conditions have pushed prices higher for two years, but so have Americans’ choices. Luxury vehicles made up almost 20% of sales early in 2023 – a historic high. They fell slightly in February – making up 19.5% of all new car sales.

In February 2023, the average luxury buyer paid $65,534 for a new vehicle, down $644 from January. Buyers continue to pay over MSRP for new luxury vehicles.

Luxury brands Alfa Romeo, Audi, BMW, Infiniti, Lincoln, and Volvo all sold their average vehicle for 1% or more below sticker price. Mercedes-Benz and Land Rover sat on the opposite side of that teeter-totter, selling for 5% to 7% over.

Electric Vehicle Price Drops Are Helping the Average Fall
Electric vehicles (EVs) are doing more than their share of work to reduce the average price.

The average new EV sold for $58,385, according to Kelley Blue Book estimates, which is still well above the industry average. But it’s $1,050 lower (down 1.8%) compared to January.

The drop in pricing was driven by significant price cuts from Tesla, which commands roughly two-thirds of the EV market. Tesla’s average transaction prices decreased by $977, down 1.6% month over month and down 5.9% year over year. Lower prices likely helped Tesla deliver higher sales volumes. Tesla sales in February increased year over year by more than 44%.

Now, go take a walk outside. Dream of lower monthly payments.

KBB.com

 

[KKatso5]

I just heard a piece about this on NPR (no I don't drive a Subaru) but the crazy part of the lead-in was them interviewing a couple at a car show. They were interviewing them about the $86k Suburban they were looking at and their rationale was they are about to start a family and they "need" a new car. Wow.

The article went on to discuss how the US manufacturers pretty much abandoned the lower end of the market - leaving that to used cars.

 

[puma1552]

I suspect the peanut gallery will come in and say "but but but this is because all dealers stock is highest trim cars and that's all anyone is buying!"

Yet I can't think of a single person I know in real life besides myself who actually buys top trim cars. Everyone I know still buys base models and middle trim SE whatevers, and my Sunday afternoon dealer creeping seems to confirm there are SE whatevers as far as the eye can see and virtually nothing in the trims I would be interested in.

 

[Uber Wagon]

The article went on to discuss how the US manufacturers pretty much abandoned the lower end of the market - leaving that to used cars.

THIS. Even new Mitsubishi Mirage is selling for $20K these days, and that's absolutely worst car ever in history of mankind.

BTW, average used car price in March was $21,343. So even $30K doesn't buy much these days.

 

[Uber Wagon]

Also, mandatory Abe Simpson gif:

 

[KKatso5]

What worries me is that I make a pretty good living and in my opinion I would not buy a $50k car even with my good salary (I haven't had a car payment in 10 years). That means that there are A LOT of people paying $50k without the income to support it so they are either leasing to taking out 7 year loans to keep the costs down but never getting off the monthly payment death-spiral... they roll to the next car in 4-5 years and roll the negative equity into the next loan. Yikes

 

[chucchinchilla]

The article went on to discuss how the US manufacturers pretty much abandoned the lower end of the market - leaving that to used cars.

I would argue it's the customers who are abandoning the lower end of the market and manufacturers are simply responding to customer demands. Even so, the Corolla and Rav4 are still out there providing quality transportation, very good standard features, at an affordable price so it's not like there are zero options.

That said I still agree it's shocking how expensive cars have become. For us it means we'll just have to make sure our next car is a bit more future proofed since we'll be keeping it for an even longer period of time.

 

[aar0n.]

Inflation. It's all about inflation.

$48,763 2023 dollars are the equivalent of $29,824 2003 dollars.

Average car price in 2003 was $24,773, which is $40,503 2023 dollars. So cars have gotten a little more expensive for sure but we often talk about how you get a whole lot more in your average car today vs 20 years ago.

2021 US median household income: $70,784 (I don't believe there's enough data to pull 2022 or 2023 numbers but assuming it's similar)
2003 US median household income: $43,318

2023: Average car price is about 69% (nice) of total household income
2003: Average car price is about 57% of total household income

 

[masa8888]

And here's a chart of median house prices in the US over the past 18 years. Mortgage and finance rates are a couple percentage points higher too, so people entering the market to buy a new home and car today are paying like 3x more per month on the combined payment. Definitely not sustainable, and the cracks are already appearing.

 

[puma1552]

What worries me is that I make a pretty good living and in my opinion I would not buy a $50k car even with my good salary (I haven't had a car payment in 10 years). That means that there are A LOT of people paying $50k without the income to support it so they are either leasing to taking out 7 year loans to keep the costs down but never getting off the monthly payment death-spiral... they roll to the next car in 4-5 years and roll the negative equity into the next loan. Yikes

We bought two $50k cars about 8 months apart (one planned, one unplanned) and both were negotiated to 10-15% off and both then had $10k down, and we financed somewhere in the mid-upper $30ks for both at 2%. Both of them are sub-5 year terms and the payments are still north of $700 for each. It's affordable for us, and we both like our cars, but two weeks after I bought mine I finally got told I could WFH permanently and now almost two years later I have 8500 miles on mine, and it's like do I really need a $700+ payment to drive to Target once a week? We have the income to support it but it's pretty insane to think about buying a $50k car, getting a big discount, putting $10k down, and still having $700+ payments, granted they are sub 5 year terms but still.

Inflation. It's all about inflation.

$48,763 2023 dollars are the equivalent of $29,824 2003 dollars.

Average car price in 2003 was $24,773, which is $40,503 2023 dollars. So cars have gotten a little more expensive for sure but we often talk about how you get a whole lot more in your average car today vs 20 years ago.

2021 US median household income: $70,784 (I don't believe there's enough data to pull 2022 or 2023 numbers but assuming it's similar)
2003 US median household income: $43,318

2023: Average car price is about 69% (nice) of total household income
2003: Average car price is about 57% of total household income

And this is the problem. Yeah, cars have gotten better to help justify the fact cars are selling for $48k instead of the $40k they should be selling for (though I'd also argue technology should get cheaper so even though cars get better, they should probably still just more or less track inflation as I think they typically had in prior decades), but incomes have stagnated or even effectively been cut. Inflation last year was 9%, my raise was 2%. Company excuse was "we benchmark other companies, not inflation." But other companies were well documented doing 3-5% raises, which was better than mine but still **** compared to inflation. I also went to Applebee's with a buddy and for an appetizer, two entrees (not steaks), and a pop and a beer it was like $65 + tip. For Applebee's...the middle class doesn't stand a chance.

 

[chucchinchilla]

Inflation. It's all about inflation.

$48,763 2023 dollars are the equivalent of $29,824 2003 dollars.

Average car price in 2003 was $24,773, which is $40,503 2023 dollars. So cars have gotten a little more expensive for sure but we often talk about how you get a whole lot more in your average car today vs 20 years ago.

2021 US median household income: $70,784 (I don't believe there's enough data to pull 2022 or 2023 numbers but assuming it's similar)
2003 US median household income: $43,318

2023: Average car price is about 69% (nice) of total household income
2003: Average car price is about 57% of total household income

An excellent point. According to this TV ad the base price of a 1995 Toyota Corolla was $12,498

Using the BLS CPI Inflation Calculator that's $25,015.96 in today dollars. So what's the base price of a new Corolla?

And that's for a bigger, better built, way better equipped car than what existed in 1995.

 

[AZGolf]

The US government does track the true cost to own and operate cars, and adjusts them in constant (inflation adjusted) dollars.

Per-Mile Costs of Owning and Operating an Automobile (current dollars) | Bureau of Transportation Statistics

Interactive Visualization: https://data.transportation.gov/stories/s/bzt6-t8cd/Note:Changes in methodology in 2004 and 2017 make estimates before and after not comparable. Ownership costs include insurance, license, registration, taxes, depreciation, and finance charges. Estimates are for new...

www.bts.gov

Two big problems however. First, they say they updated the method in 2004 and 2017 so comparing across those boundaries isn't recommended. Second, they only have data up through 2019, before the pandemic even started.

It would probably be best to compare 2021 versus 2023 however, not going all the way back to 2003. Since 2021, wages have gone up a bit, but prices have gone up much more than wages. Also interest rates have skyrocketed since 2021 and a lot fewer cars are even sold as base models. Many cars simply did away with base models and mid-grade trim levels for the past two years.

It's a rough situation, especially since inflation is generally hitting absolutely every single category of expenses by much more than typical wages have gone up. Even more true when you consider that it's mainly low income workers who saw the highest percentage wage increase, and low wage workers obviously aren't the ones buying $48,000 cars.

 

[JackStraw79]

I suspect the peanut gallery will come in and say "but but but this is because all dealers stock is highest trim cars and that's all anyone is buying!"

Yet I can't think of a single person I know in real life besides myself who actually buys top trim cars. Everyone I know still buys base models and middle trim SE whatevers, and my Sunday afternoon dealer creeping seems to confirm there are SE whatevers as far as the eye can see and virtually nothing in the trims I would be interested in.

It's not really about the trim, but more that they are building, stocking, and selling the larger and more expensive products. It's expensive to operate these days, so unless you're near the top of the heap in certain inexpensive segments, you can't really afford to keep selling them instead of more profitable stuff. For example, a lot more Atlas pieces are moving through my local VW store at $45k-ish compared to Jettas at $25k-ish.

 

[Silly_me]

Inflation. It's all about inflation.

The average new car price use to nearly perfectly mirror mid-range Toyota Camry msrp. That is no longer the case.

 

[Uber Wagon]

Moar

Average	New cars	Used cars
Monthly payment	$716	$526
Loan amount (not purchase amount)	$41,445	$27,786
Interest rate	6.07%	10.26%
Loan term	69.44 months	68.01 months

Bankate.com

 

[ValveCoverGasket]

They were interviewing them about the $86k Suburban they were looking at and their rationale was they are about to start a family and they "need" a new car. Wow.

im this > < close to assuming car mfgs are conspiring to bring us ever larger child seats ... requiring the use of a small-apartment sized suv to fit tall people into the same car as a rear facing or infant seat. just awful


anyway, carry on

 

[Zillon]

Nope, not ready to pay up. I have an immovable mental block somewhere around $35k, and the rapid acceleration of new vehicle pricing and the introduction of massive ADMs just makes me nope out. My income has also basically gone backwards in the last 3 years.

Hoping my Tacoma runs forever at this rate.

 

[gti_matt]

The article went on to discuss how the US manufacturers pretty much abandoned the lower end of the market - leaving that to used cars.

Well US manufacturers all but stopped making "cars" and are making crossovers at the minimum, and I'm having a hard time envisioning anyone buying even a small crossover being ok equipping it to stripper poverty spec to keep the MSRP at $16K, which is why the cheap cars aren't being replaced by cheap CUVs.

 

[[email protected]]

I just heard a piece about this on NPR (no I don't drive a Subaru) but the crazy part of the lead-in was them interviewing a couple at a car show. They were interviewing them about the $86k Suburban they were looking at and their rationale was they are about to start a family and they "need" a new car. Wow.

My neighbors 3 houses over. One of them is a fireman, wife is to the best of my knowledge, doing freelance design and/or fitness. Best case scenario is they are grossing $200k. A good chunk of that money is going toward their house, which sold pre-pandemic around $800k. First thing I noticed is as soon as the husband got accepted to the position, he went from a 10 year old mid-sized truck to a new loaded full-size truck crew-cab. Then, when they got their first kid, they went from a compact CUV to a mid-sized loaded SUV. This is in the span of 4 years. They are not the worst in terms of spending this much on cars based on income, but I've become more conservative despite making what is arguably considered a "good" income as well--see my reply below.

What worries me is that I make a pretty good living and in my opinion I would not buy a $50k car even with my good salary (I haven't had a car payment in 10 years). That means that there are A LOT of people paying $50k without the income to support it so they are either leasing to taking out 7 year loans to keep the costs down but never getting off the monthly payment death-spiral... they roll to the next car in 4-5 years and roll the negative equity into the next loan. Yikes

I feel the same. No brag intended, but between my wife and I, we are easily in the 95th percentile for income for the country. Around where we live, it makes us just a little bit better than average. Though the more we know about people--a flashy former neighbor that had nice vehicles/boats, but really was just renting his house this whole entire time, our neighbors behind us that have no savings or retirement whatsoever besides whatever they put into paying the mortgage on their home, yet still drive 2 $50k vehicles--the more I am concerned that there is more a show of wealth than actual wealth.

We bought two $50k cars about 8 months apart (one planned, one unplanned) and both were negotiated to 10-15% off and both then had $10k down, and we financed somewhere in the mid-upper $30ks for both at 2%. Both of them are sub-5 year terms and the payments are still north of $700 for each. It's affordable for us, and we both like our cars, but two weeks after I bought mine I finally got told I could WFH permanently and now almost two years later I have 8500 miles on mine, and it's like do I really need a $700+ payment to drive to Target once a week? We have the income to support it but it's pretty insane to think about buying a $50k car, getting a big discount, putting $10k down, and still having $700+ payments, granted they are sub 5 year terms but still.

And this is the problem. Yeah, cars have gotten better to help justify the fact cars are selling for $48k instead of the $40k they should be selling for (though I'd also argue technology should get cheaper so even though cars get better, they should probably still just more or less track inflation as I think they typically had in prior decades), but incomes have stagnated or even effectively been cut. Inflation last year was 9%, my raise was 2%. Company excuse was "we benchmark other companies, not inflation." But other companies were well documented doing 3-5% raises, which was better than mine but still **** compared to inflation. I also went to Applebee's with a buddy and for an appetizer, two entrees (not steaks), and a pop and a beer it was like $65 + tip. For Applebee's...the middle class doesn't stand a chance.

Same scenario, but went through 2 different vehicles to find the right one in 6 months, though with how the stock market is fairing now, I probably should have bought a nicer truck instead of having that money tied up in the market.

 

[Premise]

I'm not trying to show off but I voted the first one. I think car prices are ridiculous and I'd have a hard time spending more than $60k for a vehicle. It just doesn't make sense to me. I know that's the average selling price, which means most are probably buying way too much car. There are still plenty of cheaper options.