For the 11th straight month, the average transaction price for a new vehicle in the U.S. was lower year over year, according to data released by Kelley Blue Book, as higher inventories continue to add price pressure to the market. At $47,870, the new-vehicle ATP in August was also lower by 0.6% compared to the revised July ATP of $48,166.

Incentive levels increased month over month and year over year in August, according to data from Kelley Blue Book. The average incentive package in August equaled 7.2% of ATP, up from 7.0% in July to the highest level since the first half of 2021. A year ago, incentive spending was 4.8% of ATP. In the past decade, incentive spending peaked at 10.8% of ATP in December 2019.

"In our latest dealer survey, the message about price pressure was very clear," said Cox Automotive Executive Analyst Erin Keating. "Dealers are telling us the sales environment is humming along at a muted pace and there is growing pressure to lower prices, just as the overall cost index hit a new record high."

Incentives Climb Higher in August

With new-vehicle inventory in early August higher by more than 40% year over year, consumers enjoyed more choices last month and, in many cases, notably higher incentive levels. Incentive packages for vehicles from Chrysler, Ram and Jeep all shifted from below the industry average in July to above the industry average in August, as many Stellantis dealers work through higher inventory levels. (Incentives for Dodge-brand vehicles declined month over month in August, falling from 6.9% of ATP to 5.6%.) Buick, Lincoln, and Mitsubishi posted notably higher discounts in August, while Nissan and Infiniti continue to offer substantial incentives as well.

In August, Porsche, Land Rover, Toyota and Lexus continued to offer the lowest incentives in the market. These brands also consistently carry inventory levels far below the industry average.

"In the face of a sluggish sales pace – 15.1 million in August – more dealers are pulling the only lever they have: higher incentives," added Keating. "This shift to a buyers' market is good news for consumers but certainly impacts dealer profitability. Automakers are coming to the table with more incentives, but credit remains tight, putting more pressure on dealers to get creative with additional discounts and financing, affecting the bottom line."

On average, trucks and SUVs carried higher incentives last month than cars and vans. Compact SUVs, the market's most popular segment by volume, had average incentives at 9.2% of ATP, with an average transaction price of $36,506 in August. Incentives in the full-size pickup truck segment averaged 8.4% of ATP in August, up from 8.2% in July and 6.1% in August 2023. Full-size pickup ATPs in August increased slightly month over month to $65,531. High-end luxury cars had the highest incentives last month, with incentives at 10% of ATP, while vans, sports cars and small/midsize pickups had some of the lowest incentives.

Nine of the Federal Reserve’s 12 districts showed flat or declining activity in the current period, according to the Fed’s ‘Beige Book’ report. Employment levels were steady overall, though there were isolated reports that firms filled only necessary positions, reduced hours and shifts, or lowered overall employment levels through attrition.

Still, reports of layoffs remained rare. On balance, wage growth was modest, while increases in nonlabor input costs and selling prices ranged from slight to moderate.

Consumer spending ticked down in most Districts, having generally held steady during the prior reporting period. Auto sales continued to vary by District, with some noting increases in sales and others reporting slowing sales because of elevated interest rates and high vehicle prices. Manufacturing activity declined in most districts, and two districts noted that these declines were part of ongoing contractions in the sector. Residential construction and real estate activity were mixed, though most districts’ reports indicated softer home sales. Likewise, reports on commercial construction and real estate activity were mixed. District contacts generally expected economic activity to remain stable or to improve somewhat in the coming months, though contacts in three Districts anticipated slight declines.

CarGurus released its 2024 U.S. August Intelligence Report. The report found used inventory levels have declined again in August, now down 2% year-over-year (YoY) and 7.4% below August 2022 levels. Meanwhile, new-vehicle lots continue to swell even further with August up 55.1% YoY – and an eye-watering 193.3% compared to August 2022. Interestingly, however, both new and used listings saw a MoM decline in days-on-market (albeit for different reasons).

In tandem, preliminary sales data suggests that used vehicles were in high demand in August, reaching the highest reading since March 2022. According to Kevin Roberts, CarGurus’ Director of Industry Insights, the reasoning could be the following:

"Our Vehicle Demand Index speaks to the growing consumer need for affordability. Although overall used demand is up 7.4% year-over-year, cars priced under $30,000 saw significant increases in activity while vehicles over this threshold actually saw an annual decline in demand. With used car demand at its highest levels since March 2022 and inventory down year over year, we can expect competition to remain high for this segment."

Additional Report Findings: 

• Average prices for both new & used vehicles:Tighter used inventory levels have put surprising upward pressure on used vehicle prices, which came in at $28,500 for the month of August. On the new side, however, prices seem to be approaching 2022 levels, coming in at $50,100 (down 3.7% YoY). 
• Alternative powertrain listings increase in share:New ICE vehicles have quickly fallen to just under 82% of available dealer listings, a steep shift from 93.1% in August 2022. While hybrids are still the dominant alternative powertrain at over 9% of listings, EVs are quickly growing in pace with them.
• New vehicle demand saw an uptick toward Labor Day weekend:With the CarGurus Vehicle Demand Index reading increasing 11.8% YoY.
• EV prices seem to be back on the up-and-up:Data from August provided further confirmation that used EV prices seem to have found a bottom, with average prices cresting at $38k, the highest level since January 2024.
• The average prices of new hybrids are getting closer to ICE-powered vehicles:Average hybrid list prices coming in at $49.2k while ICE-powered vehicles came in at $48k.

The latest Cox Automotive Auto Market Report shows a notable decline in consumer spending volatility and stable unemployment levels, along with mixed consumer sentiment that rebounded slightly in August but later fell, according to Chief Economist Jonathan Smoke.

Retail vehicle sales demonstrated positive growth, with new car sales up 8% and used car sales increasing by 4%. Furthermore, financing options improved, as 12.1% of rates fell below 3%, while average loan rates remained stable amidst changing bond yields.

Both new- and used-vehicle supplies have tightened, and for the first time this year, used-car prices showed a marginal rise. Finally, Cox Automotive’s leading indicators depict a mixed outlook, with some year-over-year declines in leads but month-over-month improvements suggesting potential recovery.

Year over year, total spending trends have notably changed, turning negative in the second half of June and varying since then. This suggests that the growth of consumer spending has slowed down and remains inconsistent.

Consumer sentiment rose by 0.3% in August but showed a decline at the end of the month. This instability echoes the volatile spending trends mentioned earlier.

Amid fluctuating bond yields, auto loan rates have been relatively stable in August. The average rate for a used car loan stood at 13.92%, while a new-car loan was at 9.58%.

Used-vehicle supply has tightened, showing a noticeable decrease against last year. In the last week of August, average wholesale prices for model year 2021 cars rose by 0.3%, whereas retail prices climbed by 0.1%, marking the first weekly increase in 2024.