Falling New Car Prices Mean Most Buyers Are Paying Less Than the Sticker | CNN Business


Americans can once again buy cars for less than the sticker price. But that doesn’t mean they’re finding bargains at their local dealerships.

A year ago, record tight inventories meant 80% of shoppers were paying more than the manufacturers suggested retail price (MSRP) or sticker price, according to Edmunds data. For decades, car buyers had been able to negotiate a discount.

Today only 36% of shoppers pay above the label. After paying an average of $700 above MSRP in the spring, buyers paid an average of $300 less than the sticker in December.

That’s still far less than the average $2,600 buyers saved on the sticker price in 2019, according to Edmunds data, while the average transaction price remains at a record high, according to data from Edmunds and Cox Automotive, that track car sales. , prices and inventories.

That put the median transaction price at just under $50,000 in December, up about $10,000, or 26%, from December 2019, just before the pandemic upended the new-car market.

The auto industry’s inventory shortage, which began in early 2021, was driven by a lack of parts, in particular computer chips. That crisis meant cars and trucks were selling before they even hit dealerships, so if someone didn’t want to pay above the tag, there was no shortage of buyers who would.

Since then, the inventory of parts and new cars has started to improve. Car dealer lots are more crowded than a year ago: Cox estimates that the supply of new cars has increased by 800,000, or 83%, since the start of 2022, but that’s still more than 1 million vehicles per below historical inventory levels.

Automakers have focused on using the largest supply of chips and other parts to build their most expensive and most profitable models, such as large SUVs and trucks and new electric vehicles, which come with a high sticker price of their own (in addition to how waiting list for buyers).

Cheaper models like compact sedans are still in very short supply, especially as General Motors, Ford and Chrysler parent Stellantis have all more or less withdrawn from those markets. The Asian automakers that still make the cheapest car models also have some of the tightest inventories.

“Just try to find a Civic,” said Michelle Krebs, a senior analyst at Cox.

Even if buyers are paying less than the sticker today, they’re also getting less for the cars they’re trading in, as used car values ​​have fallen dramatically in the past six months.

Without tighter inventories driving new car buyers into the used car market, used car prices have fallen about 9% over the past year, according to the Consumer Price Index, the key measure of government inflation. Prices for vehicles five years old and older are down 15%, according to Edmunds data. That means the value of the trades is down by around $3,000, or 11%, just since the peak in June.

In addition, interest rates have risen sharply as the Federal Reserve has raised rates in an effort to control inflation, and buyers have to shell out record car payments, including the longest loan terms on record, to get the cars on the market. a lot.

There are signs that things will look up for new car buyers in the coming months as inventories continue to rise. That will give buyers more chances to haggle once more. Incentives offered to attract buyers, which had all but disappeared, are rising again, according to the data.

“Inventory is on an upward trajectory. That opens up some price easing,” said Zack Krelle, industry analyst at TrueCar.

Unfortunately, the biggest thing that could help prices could be a downturn in the economy, with increased job losses and unemployment. That would likely take away a lot of demand and help drive prices down. But prices may not drop as much as in past recessions, given pent-up demand from buyers who have stood on the sidelines for the past several years waiting for a chance to buy, according to Krelle.

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