Chart shows industry average transaction price versus industry average incentive spend as...

Chart shows industry average transaction price versus industry average incentive spend as percentage of ATP. Auto incentives increased slightly in January, though still at historical low levels.

Graphic: Cox Automotive

The average transaction price (ATP) of a new vehicle in the U.S. declined slightly in January 2023 to $49,388, a decrease of 0.6% ($310) from December’s record high, but is up 5.9% ($2,768) from levels a year ago. New-vehicle inventory levels are increasing from historic lows in early 2022, but prices remain elevated, according to Kelley Blue Book.

In January 2023, the average price paid was $310 more than MSRP. A year ago, in January 2022, the average ATP was more than $900 above the average MSRP. Sales volumes last month were up year over year by more than 6% but down from December, due partly to improved supply and added fleet sales.

Incentives remain low compared to pre-pandemic years, but they are trending upwards as inventory improves. The most affordable vehicles, such as compact cars, compact SUVs, and subcompact cars, had incentives between 3% to 4%, which is above industry average. As high loan rates and continued inflationary pressures appear to impact the lower part of the market, automakers are more focused on luxury and higher-end models.

The average price for a new non-luxury vehicle in January was $45,344, a decline of $271 compared to December. The majority of non-luxury brands, including Chevrolet, Chrysler, Dodge, Ford, Honda, Kia, Mazda, and Subaru, saw ATP declines between 0.3% to 4.9% month over month in January. Toyota and Ram showed the most price strength in the non-luxury market, transacting between 2% and 5% over MSRP in January.

Strong luxury vehicle sales have been a primary reason for overall elevated new-vehicle prices. This remained the case in January when luxury vehicle share jumped to a record 19.6% of total sales, up from 18.6% in December. The high share of luxury sales helps to push the overall industry ATP higher, even though luxury ATP declined.

Mercedes-Benz and Lexus showed the most price strength in the luxury market, transacting between 1.4% to 4.8% over MSRP last month. Audi, BMW, Infiniti, Lexus, Lincoln, and Volvo showed the least price strength, selling 1% or more below MSRP in January.

The average price paid for a new EV decreased in January by $3,363 (down 5.4%) compared to December. The average new EV sold for $58,725, according to Kelley Blue Book estimates, and is still well above the industry average. The decrease in pricing was due to significant price cuts from Tesla, which commands roughly two-thirds of the EV market. Tesla’s average transaction prices decreased $5,440, down 8.4% month over month and 5.5% year over year. Tesla sales in January increased year over year by more than 30%, according to Kelley Blue Book estimates.

Incentives increased in January 2023 to 2.8% of ATP, compared to 2.7% in December. In January 2021, before the new-vehicle inventory decline, incentives averaged 8.6% of ATP, according to Kelley Blue Book estimates.

Luxury cars had the highest incentives in January at 6.2% of ATP. Vans and minivans had the lowest incentives, with less than 1% of ATP.

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