When Will Car Prices Drop?

If you've been interested in buying a new or used car recently, you might've noticed that prices have skyrocketed since the last time you were in the market. This jump in prices has caused many prospective buyers to sit on the fence as they wait things out and wonder, "When will car prices drop?"

There is good news and bad news to report. The good news is that the first signs of significant discounts from the manufacturer's suggested retail price (MSRP) began roughly a year ago when new vehicle inventory began to recover from the shortages.

The bad news is that things seem to be in a bit of a holding pattern. According to Edmunds data, the average transaction price (ATP) for a new car in August 2024 was $47,476, and ATPs have been hovering around the $47K mark since the beginning of the year.

MSRPs, however, have averaged around $49K during this same time. The correlation between MSRPs and ATPs shows that "there is some discounting going on," according to Edmunds' director of insights, Ivan Drury, "but the momentum has stalled out without any major movements as of late."

What you need to know about current car prices

• In August 2024, the average transaction price was about 28% higher for new cars and 31% higher for used cars compared to the same month five years ago, according to Edmunds sales data.
• That said, sales prices have stabilized and have been heading slightly downward since January, with the average discount increasing from $1,469 in January to $1,735 in August 2024.
• High interest rates remain a factor in keeping people from buying cars.
• The top five brands offering the greatest discounts are Mercedes-Benz, Ram, BMW, Infiniti and Volvo.
• Automakers such as Kia, Land Rover, Honda and Toyota are offering the least discounts from MSRP.

Why are car prices still high?

"Virtually every vehicle that was on sale pre-pandemic versus now has seen noticeable upticks in the transacting MSRP," said Drury.

For example, the popular Ford F-150 went from $52,900 in the second quarter of 2019 to $65,152 in 2014 (not including the all-electric Lightning variant). Similarly, the Toyota RAV4 jumped from $31,979 to $38,215 in the same timeframe. Even the relatively affordable Honda Civic went from $23,494 to $28,527.

This problem has been made worse by the removal of many automakers' entry-level offerings, specifically sedans, furthering the issue of increasing prices, adds Drury. On the dealership sales lot, you're less likely to find base model trims, as the profit margins are higher for the upper trim levels.

Will car prices drop during the rest of 2024?

Edmunds analysts are not expecting new car prices to see a dramatic reduction this year. The average time a new car spends on dealer lots is anywhere between 50 and 60 days, and it's been that way for many months now. This is a relatively brisk pace, which means that dealerships may not be motivated to drop prices further.

Which brands are offering the most and least discounts on new cars?

As of August 2024, Mercedes-Benz, Ram, BMW, Infiniti and Volvo offered the greatest discounts — roughly between $6,000 and $3,300. The brands offering the lowest discounts were Kia, Land Rover, Honda and Toyota, with discounts ranging from $241 to $847 on average.

We have a detailed breakdown in the chart below. Keep in mind that this chart is a snapshot in time. Things can and will change, but it does give you a basic idea of which automakers are trending up or down in terms of discounts. In the last column, you'll see the days-to-turn figure. Days to turn is an industry term for the average number of days vehicles from a brand sit in dealer inventory before being sold. In general, the longer a car sits on the lot due to slow sales, the more the dealership is motivated to discount it. That said, it is not a hard-and-fast rule, as there are some brands with days to turn below the industry average, yet they're still discounting their vehicles.

When will we see more incentives and rebates on new cars?

According to Edmunds analysts, incentives are more widely available than they were a couple of years ago. One difference to note is that automakers are more selective about which vehicles get these special offers. Drury said you're more likely to see them on outgoing or discontinued body styles versus a refreshed or redesigned model.

Make sure to keep tabs on Edmunds' roundup of incentives and rebates, where we track the latest manufacturer offers on a monthly basis.

Are used car prices dropping?

Just like new cars, we're seeing a similar holding pattern for the average transaction prices of used vehicles so far in 2024. While older vehicles are experiencing a slight decline as the months go on, the differences are very, very minor.

Why it is still a great time to trade in your car

One bright spot to used car prices remaining high is that it makes your current vehicle more valuable. Dealerships are in need of quality used cars and this works in your favor. You'll likely be offered a higher price for your trade-in than you might have expected. A more valuable vehicle can help offset the higher price of a new car, contribute to a better down payment, or even put more money in your pocket after selling it. Use the Edmunds appraisal tool to get an instant no-obligation offer on your vehicle to determine its true value.

Will we ever return to pre-pandemic pricing?

In March 2020, when COVID-19 was in full swing, the average ATP was $38,600. Will we ever reach a price that low again? "Never, not in the slightest," Drury said. "The only way for a consumer to get an ATP that mirrors anything pre-COVID is to either get a time machine, buy used, or purchase a different model."