However, the struggle for many buyers isn’t the high prices — it’s the lack of availability. Many types of new cars are more affordable than the record number suggests, but they’re harder to find.
Most buyers are paying above MSRP
The average non-luxury buyer paid $875 over sticker price last month. Luxury car shoppers paid an average of $730 on sticker. Both numbers have improved slightly since June, though studies show car shoppers are increasingly frustrated, and they blame dealerships and automakers for the situation.
Incentives are even rarer
Buyers got some help from dealers and automakers in July. Incentives increased slightly in July and June but remained low at 2.4% of the average transaction price. A year ago, incentives averaged 5.9%.
Full-size and luxury cars were the most popular in July, while high-performance cars, full-size luxury SUVs and electric vehicles were the least.
Which brand you shop for makes a big difference
Shoppers can find a deal by considering brands that may not have been on their radar in previous years.
Honda, Kia, Land Rover and Hyundai dealers consistently charged 5% to 8% over the sticker in July.
Alfa Romeo, Buick, Fiat, Lincoln, Ram and Volvo dealers all charge a premium close to 1%.
This creates some excellent buying opportunities. In JD Power’s latest quality survey, Buick produced the highest quality vehicles for sale in America, while Lincoln scored above average.
Some cars are easy to afford, hard to find
Average price data masks the fact that not every shopper is in the same position. Luxury cars made up 17.8% of cars Americans bought in July — down from 18.2% in June, but still historically high. That pushes prices up.
“New-vehicle inventory levels are good from a year ago, but historically low, and that’s driving up new-vehicle prices,” said Rebecca Rydzewski, research manager of economic and industry insights at Cox Automotive. “Still, though average Prices are at record highs, and there are affordable vehicles out there. Compact cars and SUVs and subcompact models typically trade 30% to 40% above the industry average.
Cox Automotive is the parent company of Kelly Blue Book.
Shoppers looking for high-performance cars paid an average of $5,000 above MSRP in June. Full-size luxury SUV buyers fared even worse, paying nearly $3,000 over the sticker.
On the other hand, shoppers looking for subcompact crossovers spent a manageable $965 more than list price. Their problem was finding one to buy in the first place. Small, fuel-efficient cars are in short supply nationwide.
Automakers measure their stock of cars to sell in a metric called “days of inventory” — how long it would take to sell the cars at today’s sales price if they couldn’t get more. An old industry rule of thumb told distributors to always keep more than 45 days on hand.
With gas prices rising recently, shoppers have turned their attention to sedans. That left dealers with less than two weeks’ supply of subcompact, compact and midsize cars.
The price of electric vehicles has come down
The average price paid for a new electric vehicle (EV) fell 2.3% in July compared to June but was up 18.8% a year earlier. The average price of a new electric vehicle — more than $66,000 — is better than the industry average and more aligned with luxury prices as opposed to mainstream prices.
As more automakers introduce EVs in 2022, prices of electric vehicles may continue to decline due to increased competition. But they can be exceptionally hard to find, with many selling out by pre-order before they’re even built.