New car prices may drop in 2024
Vehicle supply has been improving, expert says
DETROIT — If you’ve been wanting to buy a new car, but couldn’t afford it, then 2024 may finally be your year.
Cox Automotive Chief Economist Jonathan Smoke says 2024 will be the best year for consumers to buy a new car since before the pandemic, as new vehicle supply increases, transaction prices come down, automakers are expected to offer more deals and interest rates should ease.
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“With supply normalizing and the economy stabilizing to hit a soft landing and not turn into a recession, it leads to an environment that is the most normal we’ve encountered since 2019,” Smoke told the Detroit Free Press recently. “For consumers looking to buy a vehicle, it’s the best year by far since 2019.”
That’s significant considering the weirdness of the past few years coming out of COVID-19.
First, new-vehicle supply hit an alltime low in 2021 and most of 2022 due to parts shortages. That pushed transaction prices up and, as the Free Press, part of the USA TODAY Network, first reported, many car dealers were selling vehicles above sticker price.
Then this year, supply improved, but average transaction prices still remained high. The U.S. new-vehicle average transaction price in November was $48,247, an increase of about 1% from October, but down by 1.5% compared with November 2022, according to Kelley Blue Book (KBB). November is the third consecutive month that new-vehicle transaction prices were lower year over year. The past three months mark the only time in the past decade that the monthly new-vehicle average transaction prices did not rise year over year, KBB data showed.
Used vehicle inventory remains constrained, Smoke said. The average used-vehicle listing price at the beginning of December was $26,091, down from about $27,000 in December of last year, according to Cox Automotive data.
But even as prices improved, interest rates soared this year keeping affordability a problem for a new or a used car, experts said. Smoke said the average interest rate on a loan for a new car is 9.5% in December compared with 5.2% in December 2021. The interest rate on a loan for a new car peaked in October at nearly 10%, Smoke said.
For a used vehicle, the average rate is just over 14% compared with December 2021 when it was 9.3%.
Smoke said the Manufacturer Suggested Retail Price on a car will continue to rise into next year because of higher labor costs after the Detroit Three automakers negotiated new contracts with the United Auto Workers, giving 25% base wage increases over the 41⁄2 year contracts and other automakers following suit offering 9% to 14% raises. Also the cost of the materials that go into cars is rising.