Kelley Blue Book (KBB) recently published its average vehicle transaction price report for the month of April 2023, which shows a drop in purchase prices. Buyers are paying below MSRP and electric car prices are down significantly.
According to KBB's data, the average transaction price for a new car fell below MSRP for the second month in a row this April. The average price of a new vehicle in the US didn't change much though. It came in at $48,275, compared to $48,289 in March. It's important to note, however, that average prices are still up nearly $2,000 from a year ago.
Meanwhile, KBB says the average price of an electric vehicle (EV) dropped to about $55,000. While that may seem pricey, and it's certainly more than the average new-car transaction price, it marks a drop of over $10,000 year over year. Moreover, the average EV transaction price is down an impressive $4,464 compared to the previous month. KBB says EVs were at peak pricing in June 2022 and have been dropping notably this year.
Research manager of Economic and Industry Insights for Cox Automotive Rebecca Rydzewski shared in KBB's press release:
“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. Now that inventory levels are starting to climb and manufacturers are increasing incentives, the market will respond accordingly."
However, Rydzewski also wrote that high auto loan interest rates are still a big concern for many consumers. Thankfully, the rising inventory and dropping prices can help to offset the additional interest.
Let's also keep in mind that Tesla, which sells more EVs in the US than all other companies by a significant margin, raised its prices throughout 2022. It wasn't until the end of 2023 that the US EV maker issued its first price cuts and incentives in the US. At the beginning of 2023, Tesla continued to drop prices, with some cuts up to $13,000. Not to mention, the most substantial reduction was on the automaker's best-selling EV, the Model Y crossover.
Executive analyst at Cox Automotive Michelle Krebs elaborated:
“April’s downward movement of EV average transaction prices reflects EV automakers, particularly Ford and Tesla, seeking a balance between pricing and profitability. 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.”
KBB adds that luxury vehicle average transaction prices also dropped in April. They fell below $65,000 for the first time in almost a year. Tesla's vehicles are classified as luxury cars even though they may not be as luxurious as legacy luxury rivals. However, they're priced similarly. That said, many EVs in the US fall in the luxury segment, and even some of those that don't are still priced accordingly.
As far as new non-luxury cars are concerned, the average transaction price was at nearly $45,000 in April, so just a bit shy of the figure for all cars as a whole.
KBB also shares that incentives climbed to their highest level in 2023, at an average of $1,714 per transaction. The publication says that automakers use such incentives to manage inventory. As inventory rises, incentives tend to rise as well.
