Average New Car Prices Hit Record High of Nearly $50,000

What happened

The average transaction price of new vehicles in the United States reached a record high of $49,507 in Dec. 2022, according to data released Wednesday by Kelley Blue Book, a Cox Automotive company. That's a 1.9% ($927) increase over the average in November and a 4.9% ($2,297) year-over-year increase.

Inventory has increased from historic lows earlier in 2022, but prices are still high. "The transaction data from December clearly indicates overall prices showed no signs of coming down as we headed into year-end," said Rebecca Rydzewski, research manager of economic and industry insights for Cox Automotive, in a press release.

Average prices vary depending on the type of vehicle, and not all categories had price increases. Kelley Blue Book's research found that:

• Average non-luxury vehicle prices reached a record high of $45,578. That's a 2.3% ($994) increase over the average in November and a 5.8% ($2,506) year-over-year increase.
• Average luxury vehicle prices dipped to $66,660. That's a 0.3% ($216) decrease from the average in November and a 2.8% ($1,796) year-over-year decrease.
• Average electric vehicle prices decreased to $61,448. That's a 5.5% ($3,594) decrease from the average in November and a 0.6% ($397) year-over-year decrease.

So what

It has been difficult for consumers to find vehicles at affordable prices. Both new and used car prices increased significantly in 2022. Due to high demand and low supply, many car buyers have even had to pay above sticker price. For over a year, the average transaction price of new vehicles has been higher than the manufacturer's suggested retail price (MSRP).

If you've been car shopping or are planning to do so soon, this is discouraging news. And unfortunately, prices aren't the only car costs that are going up. Car insurance rates are also rising, and interest rate hikes have made auto loans more expensive.

Now what

It's best to hold off on buying a car right now, considering how high prices and loan interest rates are. If you have a reliable car, you may want to stick with it until the wheels fall off -- or at least until you don't need to pay above MSRP to get a new one. From a personal finance perspective, that's the soundest decision.

However, that's clearly not an option for everyone. If you need to buy a car, here are a few ways to save money:

• Don't buy more car than you need. Average prices are much lower for compact ($26,282) and mid-size ($31,609) cars, so these can lower your car ownership costs quite a bit.
• Consider buying a used car. Average used car prices have declined from their previous record highs and are expected to continue dropping. While there may not be many amazing deals yet, you could still spend a lot less this way.
• Rate shop if you need a loan. The best auto loans often have lower rates than what you'd get elsewhere.