New car buyers finally get some good news about…

New car buyers finally get some good news about inflated prices

Many Americans have faced financial challenges when buying new cars, but there is relief for those who can stomach the pain.

While the days of generous deals and pricing are in buyers' pasts, some recent shifts in pricing and income trends suggest that new cars could be inching towards being a little more affordable for the first time in years.

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However, "affordable" is still a vague term, as the price of the average new car remains at cringe-worthy levels, and interest rates only dampen the mood further into doom.

But in a market that has been defying both consumers' patience and logic, a small shift towards the positive is great news for consumer confidence, as it may signal that new car prices are at the tip of the iceberg.

New data from Cox Automotive reveals that the average price of a new vehicle in the U.S. dipped 2.2% in January 2025, while incomes are rising.

Prices are slowing while Americans take home more money.

According to new data from Cox Automotive, the average price of a new vehicle in the U.S. dipped 2.2% in January 2025, settling at $48,641, compared to $49,738 in December 2024. Although the figure represents a 1.3% year-over-year increase from the $48,031 figure last year, the January data is a significant break in a trend that saw prices increase for four consecutive months.

Critically, at the same time as prices dipped, Cox found that prospective buyers had more breathing room to absorb a new monthly payment. They found that the average monthly car payment fell in January 2025, dropping 1.3% to $755—down 1.7% from the same time last year and significantly below the eye-watering $795 peak in December 2022.

One way that Cox Automotive gauges affordability how many weeks of income the average American buyer needs to save up in order to purchase a new car.

They found that they needed just 37.7 weeks in January, down from 38.2 weeks in December and a more considerable improvement over 39.6 weeks they measured last year. According to Cox and Moody's, this figure is at the best level in 41 months.

Jonathan Smoke, chief economist at Cox Automotive, attributed the shift to seasonal price drops, particularly in January when the market comes back after buyers took advantage of seasonal sales for luxury cars in December.

“Lower prices, combined with higher incomes, more than offset lower incentives and a slight increase in interest rates during January,” Smoke said in a statement.

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Not all cars are getting cheaper, though.

A closer look at the data reveals that while buyers of popular and mainstream car segments are getting a break, buyers who think they can splurge are in for a nasty suprise.

The segment that biggest average price drop in January 2025 were full-size cars, which saw their average transaction prices (ATPs) drop by 7.5% from December. Luxury subcompact SUVs/crossovers followed with a 6.4% decline. Even luxury cars, compact luxury SUVs, and high-performance vehicles saw some price drops, which shows that some corners of the market are getting cheaper.

But not everything is getting cheaper. Luxury full-size SUVs/crossovers defied the lower-priced trend with prices climbing 4.1% to an average of $112,405 at the dealer. High-end luxury cars also saw a 2.6% increase, rising to $120,765.

If you're on the hunt for your dream car, you might want to think twice if you think you're getting a deal as some luxury brands are holding their values at the dealer.

Cox data shows that the average transaction price of brands like BMW, Cadillac, and Mercedes-Benz are averaging over $74,000, while Porsche and Land Rover lead the market in price, with average transactions well above $100,000 in January.

Recent price dips, coupled with increasing incomes, present a fantastic opportunity for smart buyers. Staying aware of market trends can empower you to negotiate confidently. However, if you’re exploring high-end options, you may need to save up a little bit more for the brand name.

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