Strong new-vehicle inventory brings better incentives and more sales, says J.D. Power

During and immediately after the pandemic, automakers backed off incentives, and dealers refused to negotiate prices as inventory shortages and delivery delays became the norm. Thankfully, that situation is changing, at least slowly, as J.D. Power’s recent research showed that there are more cars on dealers’ lots.

Retail transaction prices are down from May 2023, at $45,033, a 2.3 percent decrease. Buyers are keen to the change, too, as they are on track to spend $50.9 billion on new cars this month, almost seven percent more than May last year and the second strongest May sales month on record.

Incentives are rebounding, though they remained relatively flat from April. Automakers’ average incentive expenses are up 48.1 percent from last year and are expected to crest $2,600 per vehicle. Overall, incentives average 5.3 percent of a new vehicle’s MSRP. That increase is partly driven by more lease deals, with leases expected to grow to almost 24 percent of new retail sales.

More new-car inventory brings more benefits than better deals for buyers. Dealers have had fewer pre-sold vehicles, making it much easier to walk onto the lot and find a suitable model. Though the data doesn’t include it, the increased inventory levels should also temper some of the extreme markups on popular models we’ve seen over the last few years.

While all of this is good news if you’re hoping to buy a new car, the situation isn’t all rainbows and puppies. The average interest rate for a new car loan is projected to climb to 7.1 percent, a jump of 17 basis points from last year — buyers’ average monthly payments, while down slightly, are still elevated. A $3 decrease from May 2023 only brought the average payment to $727, due in part to continued high interest rates and more expensive vehicles with larger loan balances.