Vehicle prices moderated in January, with the new car market experiencing disinflation and used prices continuing to fall as the auto market appears poised to return to pre-pandemic levels.
The Consumer Price Index (CPI) showed prices in January rose more than expected, with a 0.3% jump over last month and a 3.1% gain over the prior year, slightly higher than December’s 0.2% month-over-month increase but a deceleration from December’s 3.4% annual gain.
But new vehicle prices were flat for the month, only up seven-tenths of a percent year over year. In the used market, prices were down 3.4% in January and 3.5% year over year.
This continues the trend seen in December and in the back half of 2023, where prices moderated though were still elevated compared to pre-pandemic levels. Recall that in December, new vehicle prices were up 5.9% for 2023 (though the gains were smaller at the end of the year), and used prices were down 8.8% year over year.
January is typically a slow month for auto sales, with new models out for a few months now and hefty year-end incentives no longer in play. A bigger test for inflation in the auto sector will be during the spring buying season when consumers use tax refunds to buy new and used vehicles, and automakers start offering up new incentives to clean out inventory.
New vehicle sales growth slowed in January too
Also on Tuesday, Cox Automotive’s Kelley Blue Book (KBB) reported that the pace of new vehicle sales slowed in January, despite lower prices and higher incentives.
KBB said the new-vehicle average transaction price (ATP) in January was $47,401, down 2.6% from December 2023 and down 3.5% compared to a year ago. Despite lower prices, KBB estimated the industry’s seasonally adjusted sales pace was 15 million in January, down from the 16.1 million pace in December 2023 and below the 15.1 million from a year ago.
“It is common to see lower transaction prices and sales in January, as December typically is a hot month for luxury vehicle sales,” Cox Automotive analyst Erin Keating said in the report. “However, the year-over-year new-vehicle ATP decline of 3.5% is notable. Prices have been trending downward for roughly six months now as automakers are sweetening deals to keep the sales flowing.”
Though typically less than 10% of overall sales, declining demand and prices in electric vehicles could also be a factor in falling transaction prices and thus depressed sales volume. KBB found that year over year, new EV prices have slipped 10.8%; however, in January, EV prices were higher month over month by 3.2%, but this was due to the average EV transaction price falling to $53,611 in December, the lowest point in the past 12 months.
“First and foremost, the overall narrative is unchanged – EV prices have come down significantly in the US in the past year, led by price cuts at Tesla,” said Mark Strand, senior director of business intelligence at Cox Automotive.
KBB noted that incentives jumped for Tesla rivals such as the Volkswagen ID.4 (VWAGY), Nissan Leaf (NSANY), and the popular Hyundai IONIQ 5 (HYMTF) in January as automakers tried to match the deep discounting implemented by Tesla (TSLA).
“Prices for the Tesla Model Y, the industry’s EV volume leader, have tumbled more than 21% in the past year, falling from nearly $63,000 in January 2023 to less than $50,000 last month,” the report said.
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Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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