In September, the average transaction price reached $50,080, reflecting a 2.1% increase from August and a 3.6% rise compared to the same month last year. This year-over-year change is the most significant seen since early 2023. Concurrently, average dealer incentives are also on the rise, now accounting for about 7.4% of that average price, which translates to an estimated $3,700—up from 7.2% just a month prior.
Cox Automotive’s Executive Analyst Erin Keating noted that the era of the $20,000 vehicle is largely over. More price-sensitive consumers are either delayed in their buying decisions or are gravitating towards the used vehicle market. Keating further explained that tariffs have added new cost challenges, but the main contributors to this increase are a growing mix of electric vehicles (EVs) and luxury car sales. Currently, EVs represent 11.6% of the market—a new high, largely driven by a rush to buy EVs ahead of the expiration of federal tax credits at the end of September.
Looking back, the rise in vehicle prices has been progressive, particularly accelerating since early 2021. Historical data from Edmunds indicates that in January 2016, the average new car cost $33,618. By March 2021, this figure had climbed to $39,950—a notable increase of $6,332. The subsequent nine months saw an even sharper spike, with prices jumping another $7,000 to reach $46,626 by December 2021. Post-pandemic trends have stabilized somewhat, but the market remains somewhat volatile, with fluctuations of up to $2,000 observed quarterly.
What lies ahead for the automotive market? While minor downward adjustments in price might occur over the coming months, overall trends do not suggest a turnaround. EVs, in particular, will be worth monitoring, especially since the elimination of their tax rebates may impact sales. Additionally, automakers and dealerships might ramp up incentive spending in a bid to offset potential declines in affected models.
