High Prices For New Cars Slowing, Discounts Rising For Most

[ice-capades]

High Prices For New Cars Slowing, Discounts Rising For Most

https://www.freep.com/story/money/cars/2023/08/09/new-car-price-inflation-july-average-transaction/70558016007/

 

 

Car buyers are getting a respite in terms of rising prices on new vehicles.

 

On Wednesday, Kelley Blue Book released July pricing data that showed the smallest year-over-year price increase in the last decade, prompting Research Manager Rebecca Rydzewski to write, “New-vehicle price inflation has all but disappeared in 2023.”

 

According to Kelley Blue book data, the average price Americans paid for a new car was 0.4% higher than one year ago. The average transaction price of a new vehicle in July was $48,334, about $199 higher than it was in the year-ago period.

Reasons to head to a showroom

In more good news, data showed that compared with the start of the year, average transaction prices are down 2.7%, or $1,335, the largest January to July drop in the past decade, Kelley Blue Book data showed.

 

“New-vehicle prices, primarily driven by cuts in luxury and electric vehicles, are decreasing as inventory is steadily improving," Rydzewski said. "With higher inventories and higher incentives helping to keep downward pressure on prices, there certainly are good reasons for shoppers to be heading back into the market.”

 

In July, most carmakers increased the amount of incentives offered on new cars for the 10th consecutive month to the highest level since October 2021, averaging $2,148, or 4.4% of the average transaction price. One year ago, average incentive spending was 2.4% of the average transaction price, Kelley Blue Book data showed.

GM to keep its discounts low

But don't count on General Motors offering big discounts anytime soon, said CFO Paul Jacobson on Wednesday. He spoke at the J.P. Morgan 2023 Auto Conference, which was web-streamed to the media.

 

"We’ve spoken pretty consistently over the last several months about potentially incentives normalizing, but it’s a new normal compared to before," said Jacobson, who's known to make public investments in GM to signal confidence in its profits to Wall Street.

 

GM is tweaking its distribution model so that it has more inventory than in recent years, but it is not returning to the past levels of flooding dealerships and then having to offer big discounts to move new cars.

 

“We’re tweaking our distribution models to make sure we get vehicles to market when it matters so that it’s there for consumers to streamline that process,” Jacobson said. “What you’ve seen year-to-date, and this continued in July, was the pace of GM incentive increases is significantly lower than what we see across the industry.”

 

He did not provide any figures, but he said GM will continue to match supply to demand to maintain its profit margins.

Average prices for non-luxury, luxury and EVs

In July, the average price paid for a new non-luxury vehicle was $44,700, a half-percentage point increase compared with the year-ago period and down by $471 compared with June.

 

But unlike five years ago, only the Mitsubishi Mirage subcompact car had an average transaction price below $20,000 at $19,205. In July 2018, there were a dozen vehicles below $20,000, Kelley Blue Book data showed. Many small vehicles, including the Hyundai Venue, Kia Rio, Nissan Versa and Toyota Corolla are all transacting well over $20,000, it showed.

 

By contrast, there were 32 vehicles in the Kelley Blue Book database selling for an average price above $100,000 in July, and that excludes the uber luxury cars such as Ferrari, Lamborghini and Rolls-Royce. In July 2018, there were only 12 vehicles in the over-$100,000 category.

 

But the average price paid for a luxury vehicle in July was down almost 3% year-over-year at $63,552.

 

In the EV segment, increased inventory and price cuts by market leader Tesla have brought average transaction prices down there too.

Edited August 10, 2023 by ice-capades
Additional Content

[Chrisgb]

54 minutes ago, ice-capades said:

High Prices For New Cars Slowing, Discounts Rising For Most

https://www.freep.com/story/money/cars/2023/08/09/new-car-price-inflation-july-average-transaction/70558016007/

 

 

Car buyers are getting a respite in terms of rising prices on new vehicles.

 

On Wednesday, Kelley Blue Book released July pricing data that showed the smallest year-over-year price increase in the last decade, prompting Research Manager Rebecca Rydzewski to write, “New-vehicle price inflation has all but disappeared in 2023.”

 

According to Kelley Blue book data, the average price Americans paid for a new car was 0.4% higher than one year ago. The average transaction price of a new vehicle in July was $48,334, about $199 higher than it was in the year-ago period.

Reasons to head to a showroom

In more good news, data showed that compared with the start of the year, average transaction prices are down 2.7%, or $1,335, the largest January to July drop in the past decade, Kelley Blue Book data showed.

 

“New-vehicle prices, primarily driven by cuts in luxury and electric vehicles, are decreasing as inventory is steadily improving," Rydzewski said. "With higher inventories and higher incentives helping to keep downward pressure on prices, there certainly are good reasons for shoppers to be heading back into the market.”

 

In July, most carmakers increased the amount of incentives offered on new cars for the 10th consecutive month to the highest level since October 2021, averaging $2,148, or 4.4% of the average transaction price. One year ago, average incentive spending was 2.4% of the average transaction price, Kelley Blue Book data showed.

GM to keep its discounts low

But don't count on General Motors offering big discounts anytime soon, said CFO Paul Jacobson on Wednesday. He spoke at the J.P. Morgan 2023 Auto Conference, which was web-streamed to the media.

 

"We’ve spoken pretty consistently over the last several months about potentially incentives normalizing, but it’s a new normal compared to before," said Jacobson, who's known to make public investments in GM to signal confidence in its profits to Wall Street.

 

GM is tweaking its distribution model so that it has more inventory than in recent years, but it is not returning to the past levels of flooding dealerships and then having to offer big discounts to move new cars.

 

“We’re tweaking our distribution models to make sure we get vehicles to market when it matters so that it’s there for consumers to streamline that process,” Jacobson said. “What you’ve seen year-to-date, and this continued in July, was the pace of GM incentive increases is significantly lower than what we see across the industry.”

 

He did not provide any figures, but he said GM will continue to match supply to demand to maintain its profit margins.

Average prices for non-luxury, luxury and EVs

In July, the average price paid for a new non-luxury vehicle was $44,700, a half-percentage point increase compared with the year-ago period and down by $471 compared with June.

 

But unlike five years ago, only the Mitsubishi Mirage subcompact car had an average transaction price below $20,000 at $19,205. In July 2018, there were a dozen vehicles below $20,000, Kelley Blue Book data showed. Many small vehicles, including the Hyundai Venue, Kia Rio, Nissan Versa and Toyota Corolla are all transacting well over $20,000, it showed.

 

By contrast, there were 32 vehicles in the Kelley Blue Book database selling for an average price above $100,000 in July, and that excludes the uber luxury cars such as Ferrari, Lamborghini and Rolls-Royce. In July 2018, there were only 12 vehicles in the over-$100,000 category.

 

But the average price paid for a luxury vehicle in July was down almost 3% year-over-year at $63,552.

 

In the EV segment, increased inventory and price cuts by market leader Tesla have brought average transaction prices down there too.

It's hard to reshape the standard model: large inventory, floorplan financing, spot delivery. The ideal of increased customer orders, reduced floorpan, and covering more of the asphalt with profitable used inventory seems to have faded.

[rperez817]

23 minutes ago, Chrisgb said:

It's hard to reshape the standard model: large inventory, floorplan financing, spot delivery. The ideal of increased customer orders, reduced floorpan, and covering more of the asphalt with profitable used inventory seems to have faded.

 

That reshaping is desperately needed, as "large inventory, floorplan financing, spot delivery" is a horrendous and outdated business model for retail sales of new automobiles.

Edited August 10, 2023 by rperez817

[Chrisgb]

13 minutes ago, rperez817 said:

 

That reshaping is desperately needed, as "large inventory, floorplan financing, spot delivery" is a horrendous and outdated business model for retail sales of new automobiles.

Unfortunately, with the mega publicly traded dealer groups in NA, getting dozens or hundreds of rooftops prioritized to order-outs would be Herculean. While the floorplan assistance and factory rebate money could be applied as deep discounts on Dlr Group A's orders, Dlr Group B's store across the street is rolling spot D's. I think more money is lost by having the wrong configuration of models in inventory; to wit the Mach-e's on the ground unsold and floorpan meter running. It would have to start at the factory level to be done, IMO. Reduce or eliminate floor plan assistance, offer bigger rebates & Factory to Dlr incentives on customer orders vs stock orders. If nobody has acres of inventory, everybody would order out. You'd still need fleet sales to balance run rates, but in the end I believe it would be a win-win all around; consumer, dealer and factory.

[rperez817]

33 minutes ago, Chrisgb said:

It would have to start at the factory level to be done, IMO. Reduce or eliminate floor plan assistance, offer bigger rebates & Factory to Dlr incentives on customer orders vs stock orders. If nobody has acres of inventory, everybody would order out. You'd still need fleet sales to balance run rates, but in the end I believe it would be a win-win all around; consumer, dealer and factory.

 

Excellent points Chrisgb. I think that part of the difficulty Ford is experiencing nowadays with fully embracing Jim Farley's build to order business model stems from production planning and factory issues. Those issues result in extended order to delivery times for retail sold orders, making things more difficult for both vehicle buyers and dealers.

[jpd80]

On 8/11/2023 at 1:06 AM, rperez817 said:

 

Excellent points Chrisgb. I think that part of the difficulty Ford is experiencing nowadays with fully embracing Jim Farley's build to order business model stems from production planning and factory issues. Those issues result in extended order to delivery times for retail sold orders, making things more difficult for both vehicle buyers and dealers.

Exactly

Plus if you open up the variability of customer orders, how does Ford lock in huge parts forward orders to get get discounts?

The answer is they can’t, it messes up their all the build projections and parts sequencing.Remember that Jim Farley has no idea about actually ordering parts and building vehicles……

Edited August 12, 2023 by jpd80

[jpd80]

I see that US inflation has fallen to 3%, so hopefully interest rates remain on hold for the rest of the year while everyone takes a breath. Perhaps an economic recession is avoidable while sales growth remains flat, a good outcome for now….