Americans Buying New Cars Again Despite Average Sticker Price of Nearly $50,000

New Jeep vehicles sit on a Dodge Chrysler-Jeep Ram dealership's lot in Miami on Oct. 3, 2023. Joe Raedle/Getty Images

American auto buyers are buying new cars again, and with more choices, as inventory has reached its highest level in four years. According to some auto analysts, despite that prices remain high—just less than $50,000—the auto-consumer mentality has turned a corner, bringing buyers back to the market as 2024 reaches its end.

“One subtle change that happened in November and probably for the next couple of months is a shift in buyer psychology,” said Jonathan Smoke, chief economist at Cox Automotive.

“Since 2021, hesitancy has been the main mode of thinking for a buyer. There was no sense of urgency, and the feeling was that prices were at their peak and incentives would improve. But now the expectation is that interest rates only have so much room to come down,” he told The Epoch Times.

According to Cox Automotive’s recent Auto Market Report, Americans are on pace to buy 16 million cars this year, up from 15.5 million in 2023. With the election over and year-end deals available, car buyers are also taking advantage of the more significant inventory choices.

“In the data we track week to week, we have found that we currently have the highest level of auto inventory since 2020,” Smoke said.

“There’s a good mix of 2024 and 2025 models available, and there are even some 2023s lingering. That has made incentives to become more significant. You’ve got more choices and more incentives this time of year.”

New Car Prices Remain High

Kelley Blue Book, owned by Cox, reported in November that new-vehicle prices averaged $48,623. Only one new model, the Mitsubishi Mirage, is available for less than $20,000. The good news for consumers is that discount incentives for buyers have increased 60 percent from 2023, to an average of 7.7 percent of the transaction price as of October.

Despite the high new car prices, according to Cox, increased consumer enthusiasm for buying a new car has reached a three-and-a-half-year high now that the presidential election has concluded. Its Index of Consumer Sentiment increased by 1.4 percent in October and was up 4.6 percent in November.

While buyer enthusiasm has heightened, some analysts wonder where that exuberance is coming from, given that inflation is hitting so many households hard.

According to Experian’s State of the Automotive Finance Report, the average new car payment exceeded $730 a month in 2024, with more than 80 percent of car buyers financing all or part of their purchase at rates ranging from 5.24 percent to 15.77 percent, depending on credit score.

“There’s a lot of opposite thinking going on right now because the concern for the U.S. economy was such a big deal this election. Then we see that Black Friday spending was at record levels. You have to wonder where the consumer’s head is at the moment,” longtime auto analyst David Zoia told The Epoch Times.

Zoia said that the buyer market is not as robust as some claim.

“For the most part, consumers are not spending money on vehicles the way there were a few years ago, and it’s my belief that the market has actually softened,” he said.

Surging Inventory Raises Concerns for Automakers

Some also worry that although it’s good for consumers, the rising tide of new car inventory is actually shining a spotlight on current auto manufacturer struggles.

This week, Stellantis, the maker of Jeep, Ram, and Fiat, reported a 27 percent drop in third-quarter revenue and announced the resignation of CEO Carlos Tavares. Meanwhile, Nissan announced significant revenue declines and a sales decrease of 1.6 million units in its latest report for the first half of 2024. The company has also made several executive changes in addition to the announcement last month that they would be laying off 9,000 workers.

Cloud Theory, a data and auto insights company, reported last month that the rise in auto inventory levels has also contributed to concerns about dealer turn rates—the number of times a dealership sells and replaces its entire inventory of vehicles within a specific period—and pricing pressures.

However, according to Rick Wainschel, vice president of data and analytics at Cloud Theory, this factor is surprisingly not causing an immediate drop in consumer prices.

He told The Epoch Times that “there’s a lot going on with supply and demand” such that the decrease in prices normally expected as a result of increased inventory “is just not happening.”

He said one reason for the high inventory is that the timeline for consumers to purchase a car has gotten longer.

“Most now buy every three to five years. The changes that have occurred are profound, and if you bought a car within your price range and had a certain price point and monthly payment, all of that got blown for an abundance of reasons,” he said.

“One was the rise of inflation, and the other is that interest rates are higher than three to five years ago. Another is the choice that OEMs [original equipment manufacturers] made between 2019 and now to discontinue their low-end vehicles.”

According to proprietary numbers provided to The Epoch Times by Cloud Theory, new-car inventory levels steadily increased in 2024, reaching 3.23 million.

The company said that although these numbers have not yet returned to pre-pandemic levels, they are heading in that direction. According to the company, auto manufacturers will come under additional turn rate and pricing pressure if inventory levels reach 3.4 million to 3.5 million.

But with inventory climbing, the season is bright for consumers willing to plop down close to $50,000 for that new car smell.

“We are ending the year with very positive momentum,” Smoke said. “We are expecting November and December to be the two strongest months of the year and ending with much more momentum than we had at the beginning of 2024.”