Profits Rise, But Not for Long
A pullback on incentives offers short-term relief for some dealers.
Dealers are reaping the rewards of a pullback in manufacturers’ incentives – but don’t expect it to last long.
A dip in manufacturers’ incentives in April boosted average new-vehicle transaction prices (ATP), which increased month-over-month to $48,510 from $47,481, reports Kelley Blue Book (KBB), part of Cox Automotive. That 2.2% jump marked the first increase this year.
“The month-over-month increase in pricing in April is likely just a reflection of some pullback on incentives compared to the end of Q1, in March, when many automakers were pushing discounts to hit a strong finish to the quarter,” says Erin Keating, executive analyst at Cox Automotive. “Still, prices are down year-over-year.”
Keating says ongoing affordability challenges, including high interest rates and a slow buildup of inventory at many dealerships, will prompt manufacturers to boost incentives again. April incentives were 6.3%, 80% higher than one year ago, when many dealers were scrambling for vehicles, reports KBB.
Here are some new-vehicle sales highlights from KBB:
The share of new-vehicle sales from luxury brands in April was 18.4%, equal to the share in March and higher than the 18.2% in April 2023. Luxury transaction prices increased 2.4% from the prior month, and incentives were notably lower at 6.0% of ATP, down from 7.4% of ATP in March.
Tesla, the luxury market leader, posted larger-than-average ATP increases month-over-month in April, with a gain of 5.7% compared to March. Volvo also posted higher-than-average ATP increases last month. All other luxury makes posted month-over-month gains less than the luxury vehicle average gain of 2.4%.
Overall, luxury brand prices in April were 2.1% lower year-over-year, highlighting price pressure. In April 2023, the average price paid for a new luxury vehicle was a revised $65,418. Last month, luxury ATPs were $64,076. Luxury-brand incentive levels were higher year-over-year by 86%, rising from 3.6% of ATP in April 2023 to 6.0% last month.
After declining month-over-month in January, February and March, non-luxury vehicle prices reversed course and increased in April, rising to $44,989 from a revised $44,078 in March. Prices of non-luxury vehicles were higher month-over-month in April by 2.1% and were mostly flat year-over-year, down by only 0.2%.
Higher pickup truck prices helped push non-luxury vehicle prices higher. The average transaction price for a fullsize pickup truck in April, at $66,631, was higher year-over-year by 2.8%. The small and midsize pickup segment, which includes the popular new Toyota Tacoma, posted a month-over-month price increase of 3.3%. The average transaction price was just shy of $43,000. Unlike the broader market, pickup truck prices in April were also higher year-over-year.
In April, incentives for non-luxury brands were flat compared to March, holding steady at 6.4% of ATP. However, incentives in April were 85% higher year-over-year.
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