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Dealerships are sitting on a glut of 2023 vehicles, leading to steeper discounts and lower interest rates than usual, the auto research firm Edmunds said Wednesday. The share of ’23 models available at dealerships nationwide has reached 6.8%, up from 5.4% last year for 2022 models, it found. Faced with higher inventories, automakers and dealers are offering an average discount of $4,147 on last year’s models, Edmunds said — more than double the $1,919 average for ’22 models a year ago.
The average transaction price on a new vehicle was $46,660 in March, compared with $39,950 three years earlier, according to Edmunds, an online car-shopping guide. Repair and maintenance costs are up 8.2% year-over-year, and insurance costs are up 22.2%, Labor Department data show. Owners typically consider unloading their vehicle when they learn of a repair that will cost 10% or more of what they would pay for a new one, said Ivan Drury, Edmunds’ director of insights. He cautions that people tend to underrate the value of paying for a major fix.
Car shoppers in the first quarter financed an average of $27,774 on used vehicles, down $836, or 2.9 percent, compared with a year earlier, according to Edmunds. But used-vehicle monthly payments held steady, down $5 to $546, as the average interest rate on used models rose to 11.7 percent. The average new-vehicle interest rate was 7.1 percent during the quarter. Edmunds said its analysts encouraged consumers to watch incentives on certified pre-owned vehicles "since used-vehicle interest rates are particularly high."
"Buying a used car today is better than it has been in nearly four years," Ivan Drury, director of Insights at Edmunds, told FOX Television Stations. "We're not back to when it's like a $5,000 car or a $10,000 used car is readily available. That's definitely not the case today. But we're also not at the point in which used cars were essentially selling for the same price as new cars." The average price of a used vehicle — $27,297 as of January — is down 3% from a year ago and 12% below the peak of $31,095 in April 2022.
Edmunds indicated 20.4% of new-vehicle sales with a trade-in had negative equity in the fourth quarter — the highest in two years — compared to 17.7% in Q4 2022 and 14.9% in Q4 2021. Edmunds reported the average amount owed on upside-down installment contracts climbed to a record high of $6,064 in Q4 2023, compared to $5,347 in Q4 2022 and $4,143 in Q4 2021. “A storm is brewing in the used market as incentives and inventory continue to trickle back into the new vehicle market,” Edmunds' director of insights, Ivan Drury, said. “With demand for near-new vehicles on the decline, used-car values are depreciating similarly to the way they did before the pandemic, and negative equity is rearing its ugly head.”
The average price paid for a new vehicle in the United States fell 1.2% in January from a year earlier, to $47,338, according to data collected by Edmunds.com. That’s down 2.4% from a peak of $48,516 set in December 2022. Even with prices edging down, Ivan Drury, director of insights at Edmunds, doesn’t foresee sales of new vehicles rising dramatically this year. Still-high loan rates mean that monthly payments remain burdensome for many at a time when buyers are seeking affordable options. Automakers, Drury said, are offering discounts mainly for slower-selling vehicles. But he said he thinks discounting will extend to additional vehicles in the coming months, meaning that buyers who don’t need a vehicle right now might be wise to wait.
Jessica Caldwell, Edmunds' head of insights, is featured and shares how drivers expect -- and demand -- more amenities in their vehicles, which can quickly increase costs. Edmunds new and used vehicle average transaction price data is also featured in this segment.
Across major automakers like Honda, Hyundai, and Ford, hybrid vehicles helped boost what otherwise was a lackluster month for the industry. Hybrid versions of Honda’s Accord and CR-V models, for example, recorded their best-ever January results. And though Ford’s battery-electric vehicle (BEV) sales fell from a year ago, hybrid sales leapt 42.7% YoY. Even if hybrids’ market share drops, it’s not for lack of demand—it’s that automakers “simply can’t make enough of them,” Ivan Drury, Edmunds’ director of insights, told Tech Brew.
The IRS updated its electric vehicle tax credit rules as of Jan. 1, which makes it easier to see immediate savings on an EV purchase. "The big thing that changed is that you have the ability to take the credit at the point of sale, and you're essentially transferring it to the dealership and they're getting reimbursed," said Ronald Montoya, senior consumer advice editor at the automotive-focused site Edmunds. "It's like a discount on the vehicle, as opposed to waiting until your taxes come up and taking it there."
Automotive experts who have tested Tesla's range estimates and found them inflated said the reduction of the estimates was a necessary change. Automotive website Edmunds said the vast majority of electric vehicles it has tested performed better than their advertised ranges - with Tesla being the exception. "All of the eight Tesla vehicles we have tested failed to match their EPA estimate," Edmunds editor-in-chief Alistair Weaver said in a statement. He called Tesla's reduced estimates "an important step in providing car shoppers with a more accurate reflection of how far their vehicle will travel on a single charge.”
