The average price of new vehicles has been steadily climbing in recent years but saw a slight decline in February, dropping to $44,045, according to J.D. Power’s latest U.S. Automotive Forecast for February 2024. Despite this dip, overall spending on cars has reached record levels due to increased transaction numbers.
While the current average price remains high, it marks a notable decrease from December 2023, when new car buyers were paying an average of $48,759. This reduction comes despite simultaneous boosts in manufacturer incentives and discounts.
Interestingly, despite the high transaction prices, dealer profits declined by 31.3% last month. J.D. Power attributes this drop to rising inventory levels and fewer vehicles selling above manufacturer suggested retail prices (MSRP), which had become common during periods of supply chain disruptions and production delays.
Looking ahead, new car sales are projected to increase in February, with J.D. Power forecasting sales of 981,000 units, a 3.8% rise compared to February 2023. Adjusted for factors like sales days, this represents an 8.1% increase year-over-year and is expected to drive consumer spending to nearly $40.8 billion, making it the highest February on record.
Improved conditions are on the horizon for buyers as inventory levels continue to rise, making vehicles more accessible and reducing the likelihood of markups. Automakers are also increasing incentives, with an anticipated $66 rise over last month, while monthly loan payments are stabilizing at $722.
Additionally, used car prices are declining, offering relief to buyers, but resulting in decreased trade-in values. The average used car price dropped by $700 to $28,121, while trade-in values fell by $992 since February 2023, averaging $7,912.