Car prices are finally falling: Here's the average price for new, used in US

Gas Buddy: 2024 gas prices outlook

Gas prices fell in 2023, but what might they look like in 2024? Experts with Gas Buddy join LiveNOW from FOX to share the latest predictions and reasons why.

The cost of cars and trucks in the United States is finally slowing – and in some cases falling – giving Americans better chances of finding an affordable vehicle.

Price increases for vehicles helped fuel inflation for nearly three years. The recent price slowdown is due to a vastly expanded number of vehicles on dealer lots after years of severe shortages. With more cars and trucks available, the pressures that had sent prices surging have eased.

By the end of January, American car dealers had 2.61 million new cars, trucks and SUVs on their lots, according to Cox Automotive. For comparison, that supply a year ago was just 1.74 million.

2024, a more affordable year to buy new

While new automotive inventories are still below the roughly 4 million level that was common before the pandemic, many analysts and dealers say the rising availability suggests that 2024 will be the most affordable year of the past five in which to buy a new car or truck.

"When the lots are empty, there’s not much of a bargaining position from a consumer standpoint," said Glenn Mears, owner of a four-dealership group around Canton and Dover, Ohio. "But now that we have inventory, it’s much more competitive. Much more like it has been historically."

A worldwide shortage of computer chips, which are vital to auto manufacturing and had forced plants to curb production, caused price spikes during the pandemic.

As vehicle availability shrank, prices soared. By 2021, some dealers had no new cars at all in stock. Many frustrated buyers turned instead to the used market. The resulting surge in demand for used cars caused those prices to surge, too, elbowing many people out of the auto market entirely.

But with computer chips now abundant, auto production is rising steadily. This was also helped by the United Auto Workers returning to work after strikes last fall.

Average price of a new and used car in US

The average price paid for a new vehicle in the United States fell 1.2% in January from a year earlier, to $47,338, according to data collected by Edmunds.com. That's down 2.4% from a peak of $48,516 set in December 2022.

Though the drop is relatively modest, analysts predict that prices will keep falling this year, especially for new vehicles, as availability grows and automakers are compelled to lower prices.

The average price of a used vehicle — $27,297 as of last month — is down 3% from a year ago and 12% below the peak of $31,095 in April 2022.

Analysts expect used-auto prices to fall further before rising slightly once the peak buying season resumes in the spring.

In January, automaker discounts on new vehicles, including rebates and low-interest financing, averaged $1,469 per vehicle — five times what they had averaged a year earlier.

"What we anticipate is that there will be significantly more discounting, more incentives," said Michelle Krebs, executive analyst for Cox Automotive. "We’re already seeing that."

New vehicle prices didn’t rise at all from December to January, government figures show. Still, they're up more than 21% since the start of 2020, when the pandemic erupted and triggered severe parts shortages.

For used vehicles, the average price dropped 3.3% last month, though at just over $27,000 it remains 32% above the pre-pandemic average.

In contrast to conventional gasoline-powered vehicles, the average price of an electric vehicle actually rose 2% during the past year to $60,630, according to Edmunds, despite a growing supply of EVs. But analysts say that sharp price cuts by Ford and Tesla, along with the introduction of some more affordable models, should help lower average EV prices.

The Associated Press contributed to this report.

Cars and Trucks Consumer U.S.