Commentary & Voices
Are New-Vehicle Prices Falling? It Depends on Where You Look.
Monday October 31, 2022
The fall is one of the best times of the year for sports fans: the World Series, NFL and college football, and the beginning of the NBA basketball season. And fans can’t miss the steady stream of automotive commercials during every TV time-out. The one question on the minds of today’s new-car shoppers watching these auto ads is, “When will I be able to find a good deal on a new vehicle?”
Fair question. The answer: It depends.
If a shopper is holding out for a smoking hot deal on a new Kia Telluride, they are likely to find only disappointment. However, if the same shopper is interested in a $65,000 Ram 1500 pickup, the answer is a definite YES. There are good deals to be had.
Four Factors Drive Price Paid for New Vehicles
The purchase price consumers pay for new vehicles is primarily driven by four key factors:
- Inventory Availability
- Manufacturer Incentives
- Dealer Discounting
- Trade-In Vehicle Value
Over the past 18 months, there’s been little need for the automakers or dealers to offer any incentives or discounts. Nearly every new vehicle was either presold at full sticker or sold within a week of delivery. Manufacturer and dealer margins have never been better, and consumers have never spent more!
But the inventory shortages are beginning to subside for some brands, and their dealers are increasingly watching their lots start to fill with unsold vehicles. Cox Automotive reported that new-vehicle inventories across the industry climbed over 200,000 units last month to the highest level since June 2021.
This influx of incremental inventory has not been spread evenly across all brands. Some brands, such as Buick, Jeep and Ram, have days’ supply ranging from 75 to 85, while Kia has a brand average days’ supply of 19.
Used-Vehicle Availability is Impacting New-Vehicle Pricing
Not only does supply and demand vary widely across various new car models, but it’s also true in the used-car market – and that impacts trade-in values. Rising inflation has put downward pressure on discretionary spending, causing used-car shoppers to move toward more fuel-efficient/economical models with low days’ supply.
Used-car inventories across the country are currently bloated with expensive used merchandise priced over $35,000. Consumers trading in a 2018 Honda Civic will be much happier with the trade appraisal than those trading in a 2021 Jeep Grand Cherokee. Manheim has seen a steady depreciation of about 1% per week in wholesale values over the past eight weeks, which is not great news for consumers with a trade-in vehicle.
Inventory is Better; It’s just Unevenly Distributed
For some volume brands like Honda, Kia and Toyota, new inventories remain very tight in the 20-to-30 days’ supply range and “deals” are nearly impossible to find. And brands like Chevrolet, Ford, Hyundai and Nissan are running closer to 40-to-60 days, which was the industry desired availability goal for years.
But if consumers want the best selection and the best deals, they should head down to the local Jeep or Ram dealer where they are offering 0% for 48 months or 2.9% for 72 months on select models.
It’s incredible that Jeep’s total inventory availability is currently within 5,000 units of Toyota, but Toyota retails about three times as many vehicles.
In September, the estimated incentives on a Ram 1500 pickup was $4,426, more than double the $1,933 on the Chevy Silverado and quadruple the $1,059 on the Ford F-150. Another Stellantis vehicle that is discounted more than its competitors is the Jeep Wagoneer. While competitive full-size options such as the Ford Expedition, Chevrolet Tahoe, and GMC Yukon had offers all below $1,000, the Wagoneer’s incentive topped $4,700.
On the flip side, Kia’s large SUV, the Telluride, still demands a segment-leading 102.4% of the manufacturer’s suggested retail price (MSRP) and only has an 8-day supply. Or consider the Honda CR-V, with its 17-day supply and routinely demanding 103.4% of MSRP and has the lowest average incentive in its segment at $450.
The end of the year has historically been a great time for finding a deal on a new vehicle with model year-end clearance and holiday events. Automakers and dealers alike have always been willing to sacrifice margin to move some metal. But this year, shoppers are not likely to find much happiness at the Happy Honda Holiday event or the Kia Command the Season Event, with low inventory and low incentives. The deals will likely be found at the Jeep Big Finish Event, where both inventory and incentives are likely to be far better.
Ultimately, we believe inventory and incentive levels will increase in the future. As science-fiction writer William Gibson says, “The future is already here – it’s just not very evenly distributed.”
Brian Finkelmeyer is the senior director of new-vehicle solutions at Cox Automotive.