Based on current market indicators, a significant, widespread drop in new and used car prices is expected to continue gradually through 2024, but a sharp return to pre-pandemic pricing is unlikely. The main drivers are improving new vehicle inventory and high interest rates cooling buyer demand. The most substantial price drops have already occurred in the used car market, while new car discounts are slowly returning.
The key factor is the days' supply of vehicles, which measures how long current inventory would last at the current sales pace. As this number increases, manufacturers and dealers are forced to offer more incentives and discounts to move metal. According to Cox Automotive, the overall US new-vehicle days' supply reached 52 days at the start of 2024, a major improvement from the lows of 20-30 days seen in 2021-2022.
| Market Indicator | 2021-2022 Peak | Early 2024 Status | Trend & Impact on Prices |
|---|
| New Car Inventory (Days' Supply) | ~25 days | ~52 days | Favorable for buyers. More choice and growing incentive offers. |
| Used Car Price Index (Manheim Index) | Up 45%+ from pre-pandemic | Down ~10% from peak | Correction happening. Prices are softening, especially for near-new used cars. |
| Average New Car Transaction Price | ~$48,000+ | ~$47,000 | Slight decline. Still high, but the upward trend has stopped. |
| Average Auto Loan Interest Rate | ~4-5% | ~7-10% for new cars | Cools demand. High rates make monthly payments less affordable, pressuring prices. |
| Chip Shortage Impact | Severe | Largely Resolved | Improving supply. New car production is normalizing, replenishing inventory. |
However, don't expect a market crash. Structural changes, like the industry's focus on producing higher-margin SUVs and trucks, mean the average transaction price will remain elevated. The best opportunities for deals will be on models with oversupply, such as certain sedans and electric vehicles (EVs). For used cars, prices for vehicles 1-3 years old are falling fastest as they directly compete with better-new-car availability. If you can wait, late 2024 into 2025 should see a better buyer's market, but timing the market perfectly is difficult. Your best strategy is to research specific models you're interested in and monitor local inventory levels.
