The AutoTrader Price Index for the first quarter of 2024 has been released, and it shows falling prices and a buyer shift from used to new vehicles. As inventories of new vehicles rise, the average price of new vehicles continues to fall. Combine that with lower interest rates from automaker finance arms, and more buyers are moving into new vehicles over used.
New vehicle prices in March averaged $66,422, an increase of 7.4 per cent year-over-year, but 0.8 per cent lower than the month before. It's a noticeable decline since the record high of $67,817 reached in September of 2023.
Baris Akyurek, AutoTrader VP of Insights & Intelligence, said in his report that a 65 per cent year-over-year increase in new vehicle availability is helping drive those new vehicle price reductions. Electric vehicles are seeing the largest price cuts, down 17.6 per cent year-over-year.
The increased inventory and lower prices are here despite an industry still trying to catch up with demand. In his report, Akyurek said that AutoTrader estimates 1.5 million fewer new vehicles were sold between 2020 and 2023 because of supply constraints. Rising inventory levels (caused by higher production and not lower demand), lower prices, and captive finance interest rates down from 6.2 per cent in November 2023 to 5.3 per cent in March are all making new vehicle ownership more accessible to buyers.
Higher inventories of both new and used cars are helping drive used vehicle pricing down 4.0 per cent this year, now at an average of $37,662. Akyurek's report said that lower-income buyers are behind much of this this decline.
"These individuals have been more negatively impacted by the increase in interest rates and lower or negative household savings rates, primarily because they allocate a larger portion of their income and savings towards shelter and food expenses," he said in the report, but added that anticipated interest rate cuts should stimulate demand later in the year.
AutoTrader's Vehicle Affordability Index, a measure of average weekly wages and vehicle pricing, shows that both new and used vehicle affordability is improving. The data shows that an average used car would now take 31 weeks of average weekly wages to purchase, down from a high of 34. New vehicles are similarly down from 56 weeks to 54, all using January 2024 StatsCan wage data.
"It’s encouraging to see that affordability has started to improve both for new and used vehicles, which is good news for consumers and the market as a whole," Akyurek said in his report.
