New Car Market Stalls Out as Prices Remain Stubbornly High, Boxing Out Many Consumers

• New car prices – still hovering nearly an average of $50,000 – are only down by 3% in the past year, despite inventory on dealer lots jumping by 50%

  • Future discounts will likely come in the form of incentives, rather than substantial cuts to vehicles’ listing price

• New hybrids and affordably-priced electric vehicles are among the few bright spots in the market

• The used car market has more deals for consumers, with significant discounts to be had on used EVs, SUVs, and pickup trucks

Chicago, IL – July 8, 2024 – The new car market is sputtering as prices persistently remain close to record highs and consumers have become significantly less willing to pay, especially amid the current high interest rate environment, according to the latest data from AI car shopping app CoPilot. As a result, supply is continuing to increase on nearing pre-pandemic levels, surging by 50% over the past year to 75 market days supply. Additionally, the full impact of the CDK outages remains to be seen, but could further slow down new car sales numbers in June. 

Regardless, new car prices have only decreased by 3% in the past year, to an average of $49,926, down by less than $2,000 from last summer, when they reached record highs. Consequently, the buyer pool for new cars has become significantly more limited: Households earning $250,000 or more in annual income now represent 16% of new car buyers, compared to only 4% in 2019, according to recent data from Cox Automotive.

Despite these challenges, CoPilot expects that future discounts for new cars will likely come in the form of cash back and financing incentives, rather than cuts to listing prices. While now incentives are more prominent among higher-inventory vehicles – like the Dodge Durango (at 158 market days supply) and the Hyundai Ioniq 5 (at 114 market days supply) – they will expand through the market as inventory challenges continue to plague dealers and manufacturers. (It’s less likely that dealers, who have become accustomed to a structurally inflated environment and record-high profits, will lower sticker prices substantially.)

“Prices in the new car market are unsustainable for consumers,” said CoPilot CEO Pat Ryan. “They’re 29% more expensive than they were before the COVID-19 pandemic, and have barely moved in the past year despite inventory piling up on dealer lots. For consumers who haven’t shopped for a car in several years, they likely will be in for some sticker shock, especially if they’re financing their purchase in a high-interest rate environment. What’s more, incentives – because they’re largely concentrated among vehicles with exceptionally high inventory – aren’t helping move the needle much. We can expect new car sales to remain sluggish until cash-back and financing incentives spread more widely through the market and offer consumers some much-needed relief.”

The good news is that there is more fragmentation in the new market in terms of fuel type, with hybrids emerging as one of the few new cars currently in high demand. While new EVs and gas-powered cars have very high inventory levels, at 100 and 75 market days supply, respectively, new hybrids are in much smaller supply on dealer lots, at 62 market days supply. As hybrids are increasingly viewed as an easier entry point to buying a more environmentally-friendly vehicle, their sales have been accelerating in recent months: New hybrid inventory is currently 17% lower than those of gas-powered cars. Another point in their favor is that prices have been falling more rapidly than the overall new market, down by 6% in the past year to an average of $56,297. 

More affordably-priced EVs, including Hyundais and Kias, represent another silver lining amid a largely sluggish new car market. For instance, market days supply of the Hyundai Kona (average price $39,055) has fallen by 55% in the last year, while inventory of the Kia Niro (average price $39,326) has fallen by 20% since July 2023. With Hyundai and Ford both recently announcing plans to develop $26,000 and $30,000 EVs, respectively, it has become increasingly clear that competitive pricing may help quell consumers’ concerns about buying an EV.

There are also more deals to be had in the used car market compared to the new, and the differential between new and used cars will likely continue to increase. In the past year, the average used car price has fallen by 11% to $27,869. Used electric vehicles have dropped even further, down by 14% since July 2023, to an average of $37,851 – a far cry from their 2022 high of $67,359. While larger, more expensive used cars like SUVs and pickup trucks saw some of the most substantial price increases in the market during the pandemic, they have since reversed course dramatically: Prices of 4-7 year old pickup trucks have dropped by 17% since July 2023, to an average of $32,899, while in the past year, 4-7 year old SUVs have fallen in price by 21% to an average of $31,904 – making their prices just slightly more expensive than the average used car price overall. 

“After years of extreme inflation, used cars are finally a better deal for consumers,” Ryan added. “However, it’s still worth noting they’re 32% more expensive than they were before the start of the pandemic – more inflated than new cars in relative terms, despite recent price drops. Repair costs are also increasing at a record pace, far above the rate of overall inflation. While there are more deals to be had in the used market, consumers should carefully consider the all-in price of a used car before making a purchase.”

About CoPilot

CoPilot is the leading AI-assisted car shopping app that provides consumers with an expert partner for high-consideration purchases, starting with car buying and ownership. The platform combines massive real-time data with a winning combination of human expertise and AI-powered search to introduce transparency to the shopping, purchasing and ownership journey. The mobile application takes the time, frustration, and guesswork out of the process, empowering people to easily navigate the risks of shopping for high-value items, and to buy with confidence at the right price and the right time.

Media Contact:

Kerry Close

kclose@groupgordon.com

732-609-2644