When Will New Car Prices Drop? - Kelley Blue Book (2023)

When Will New Car Prices Drop? - Kelley Blue Book (1)

Quick Facts About Car Prices

  • In January 2023, average new car transactions were nearly 30% higher than the same month three years ago.
  • New car transactions were up nearly $3,000 since January 2022.
  • You can easily find a new Jeep, Buick, Volvo, or Ram, though not necessarily a Toyota, Kia, or Honda.

Car shopping comes with rules. Rules like “the sticker price is just the starting point and negotiate down from there” and “cars are cheapest at the end of the month and end of the year.”

That rule book got thrown out in the last two years. Shoppers grew accustomed to paying more than MSRP, or the manufacturer’s suggested retail price. They watched prices rise steadily, with no cyclical drops. The end of well-established patterns leaves many car shoppers scratching their heads. The question we get most is, “When will new car prices drop?”

The answer is more than a little complicated. In some cases, new vehicle prices have already started to decline. In others, they may stay the same for the foreseeable future. The new world of car shopping requires an open mind and new skills.

In this story, we’ll explain how to navigate the new patterns of car buying and dealership pricing, so if you’re in the market to purchase a vehicle, you’ll be equipped with the best information we know from our experts. We also dig deeper to answer the question about car prices dropping, even if the answer remains unclear.


  • What Drives New Car Prices
  • New Car Inventory Update
  • Vehicle Incentives Differ from Brand to Brand, Lot to Lot
  • The More Valuable Your Trade-in, the More Disappointing the Offer
  • New Skills for a New Market
  • Some Vehicle Prices Started Dropping
  • Some Vehicles Are Selling at Markup Prices
  • What to Expect: Looking Ahead

What Drives New Car Prices

When Will New Car Prices Drop? - Kelley Blue Book (2)

Average new car transactions remained steady month-over-month in January at $49,388. However, average transaction prices were up 5.9% compared with January 2022 and nearly 30% higher than the same month in 2020.

The data show that higher interest rates for car loans and inflation are hurting sales of less expensive models. According to Cox Automotive, the average price consumers paid for a new non-luxury vehicle in January was $45,344.

“The mix of luxury vehicle sales last month — at a record high near 20% — helped keep the overall average price elevated,” said Rebecca Rydzewski, research manager of economic and industry insights for Cox Automotive, the parent company to Kelley Blue Book.

The average price consumers paid for a new electric car decreased in January by $3,363, or 5.4%, compared to December. The drop came from the price cuts from Tesla, which commands roughly two-thirds of the electric vehicle (EV) market. The average new electric vehicle sold for $58,725.

Brian Finkelmeyer, the senior director of new-vehicle solutions at Cox Automotive, likens shopping for a new vehicle to this quote from science fiction writer William Gibson: “The future is already here. It’s just not evenly distributed.”

According to Finkelmeyer, the typical factors affecting new car prices are:

  1. Inventory availability
  2. Manufacturer incentives
  3. Dealer discounts
  4. Trade-in vehicle value

All four of those factors faced major disruptions in the last several years.

(Video) The TRUTH about Kelley Blue Books Value

New Car Inventory Update

In the past several years, inventory fell to record lows, primarily driven by a worldwide microchip shortage. Without enough crucial microchips, which control everything from engine timing to navigation systems, automakers couldn’t build cars as fast as they wanted. Despite recent improvements in car inventory, the chip shortage continues to linger. It has some carmakers like Ford rethinking inventories for the long haul, even when the chip shortage resolves.

Automakers measure their stock of new cars to sell in a metric they call “days of inventory” — how long it would take them to sell out of new vehicles at today’s sales pace if they stopped building new ones. Last year, many automakers’ inventory fell to just one week. By the end of January, many carmakers’ inventory was 62% higher than the year-ago period. However, some carmakers remain in recovery mode.

Which Automakers Have the Most Vehicles?

When Will New Car Prices Drop? - Kelley Blue Book (3)

Cox Automotive data analysis of vAuto shows that brands like Jeep, Buick, Jeep, Volvo, Chrysler, Dodge, Jaguar, and Ram offer plenty of new car stock, while others’ inventory levels still sit well under normal, like Toyota, Kia, Honda, Lexus, Land Rover, BMW, and Subaru.

RELATED: Is Now the Time to Buy, Sell, or Trade-In a Car?

Overall, inventory continues to improve. At the end of January 2023, automakers had a 57-day supply of vehicles to sell. Cox data show inventory remains low by historical standards. In January 2019, automakers had 3.63 million vehicles to sell, or a 95-day supply of vehicles.

And the lower the price category, the tighter the supply. If a shopper wants a car under $20,000, those are the toughest to find, with a 31-day supply of vehicles to sell.

Incentives Differ from Brand to Brand, Lot to Lot

When automakers routinely built up an oversupply of cars, they would discount the vehicles to get them off dealer lots. Since some carmakers and dealerships show no glut of cars to sell, they’re barely discounting. Others still need to discount cars to move metal.

(Video) Honda DROPS prices on Newest Models - Here's why!

In January, consumers paid $310 more than the window sticker price. Last year, they paid $900 more. According to Cox data, car incentives remain low compared to pre-pandemic years. As inventory improves, incentives are trending upwards.

Incentives increased slightly in January 2023 to 2.8% of the average transaction price, compared to 2.7% in December. In January 2021, before the new-vehicle inventory decline, incentives averaged 8.6% of the average transaction price, according to Kelley Blue Book estimates.

The most affordable vehicles — compact cars, compact SUVs, and subcompact cars — showed incentives between 3% to 4%, which is above the industry average.

Traditionally, dealers often tack their own discount offers onto manufacturer incentives. You’ll see those less often at the moment.

The More Valuable Your Trade-in, the More Disappointing the Offer

Trade-in value is the last factor driving prices and the strangest in today’s market.

Automakers scaled back production for several years after the 2008 recession. That leaves the higher-mileage, older cars dealers sell for less than $10,000 particularly hard to find now.

Meanwhile, the high gas prices that plagued many months of 2022 have some buyers this year looking to shed less fuel-efficient, new-model trucks and SUVs — even if they’re still relatively new.

Dealers value your trade-in based partly on what they need in stock. They’re more likely to offer a good deal on a car fewer people are looking for currently. Car dealers are oversupplied with relatively expensive used cars.


“Consumers trading in a 2018 Honda Civic will be much happier with the trade appraisal than those trading in a 2021 Jeep Grand Cherokee,” Finkelmeyer explains.

Some Vehicle Prices Are Dropping

So, when will new car prices go down? For some brands and some dealerships, prices began dropping a bit. With other brands, like Honda, Kia, and Toyota, shoppers must be prepared to hunt and pay more for tougher-to-find vehicles.

Shoppers should also be prepared to shop their trade-in around. It’s slightly more complicated to pull off, but it may make sense to sell your old car to one dealership and buy your new car from a different one if the numbers work out better. Use the Kelley Blue Book Instant Cash Offer tool to shop your trade-in to dealerships near you. When you let the deals come to you without obligation, you can select the best trade-in offer for your situation.

Some Vehicles Are Still Selling at Markup Prices

While some carmakers and dealers with plenty of inventory provide incentives, others are still in short supply.

For example, Toyota and Ram dealers sold cars between 2% and 5% over sticker prices in January.

What to Expect: Looking Ahead

But what if you desperately want a popular car that’s in low supply? Then you may need to be patient. Recent Federal Reserve interest rate hikes to rein in inflation make big-ticket purchases harder for everyone. The microchip shortage could resolve sometime in 2023. That will increase supply.

Cox Automotive data show that supply varies by market. Shoppers will find plenty of vehicles to buy in Minneapolis-St. Paul, Detroit, and Denver. But inventory remains tight in places like Atlanta and throughout Florida, which was hard-hit by hurricanes last year.

Those trends could bring down the price of even the most popular cars. But experts can’t put a date on when that will happen. Instead, shoppers should be flexible.


It’s already possible to find a low price on a new car. It just may not be the car you thought you would buy. Or you may need to go buy the car in a smaller town outside of the big city where the competition isn’t as tough.

Editor’s Note: This article has been updated for accuracy since it was originally published.

Related Articles for Car Buying:

  • Dream Car: How to Plan and Save for Your Ideal Car
  • How to Avoid Dealer Markups in 2023: Buyer Beware
  • Ordering a Car From the Factory: Everything You Need to Know


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