New Car Prices Drop Slightly, Incentives Increase: Report

The average transaction price (ATP) for new vehicles registered a 0.5 percent decline in May from the previous month, with incentive spending by sellers, for attracting buyers, rising during this period.

In May, the new vehicle ATP was $49,220, down from $49,456 in April, according to a June 10 statement from vehicle valuation company Kelley Blue Book (KBB). On a year-to-year basis, ATP prices were up by a modest 1.2 percent in May. Some of the affordable segments of the market posted sizable year-to-year gains, such as compact SUVs rising by 3.4 percent and subcompact SUVs by 4.2 percent, with the ATPs of both at “all-time highs.”

“Average transaction prices are rising 2-4 percent year over year across key vehicle segments, powered by a convergence of product cycles and supply dynamics,” said Erin Keating, executive analyst at Cox Automotive.

“Redesigned SUVs from Toyota, Kia, Jeep, and Hyundai are commanding higher prices out of the gate, while Ford’s F-Series production constraints are tightening truck inventory, lifting average transaction prices, with freshened Ram pickups stepping in to capture buyers at the premium end.”

In May, sellers spent 7.1 percent of ATP as incentives for buyers, up from 6.9 percent in April and 6.8 percent in May last year.

Incentives for electric vehicles (EVs) were almost double the industry average, with ATP for new EVs declining by 4 percent year-over-year. EV prices fell on an annual basis for the 11th straight month in May.

The 1.2 percent annual increase in new vehicle ATP comes more than a year after the Trump administration slapped tariffs on auto imports.

In April 2025, the administration instituted 25 percent tariffs on imported autos, with the rates later adjusted for certain nations following negotiations with Washington.

The tariffs were expected to trigger a surge in new vehicle prices. However, since April 2025, the 12-month inflation rate for new vehicles has mostly remained in a range of 0.3 percent to 0.9 percent every month, according to data from the Bureau of Labor Statistics.

The marginal annual increase in ATP has not dampened demand for vehicles. In May, the seasonally adjusted annual rate for new vehicle sales was up 3.2 percent year-over-year, auto industry service company Cox Automotive said in a June 8 statement.

However, due to elevated gasoline prices triggered by the U.S.–Iran war, “consumers are still spending significantly more on energy, impacting their ability to spend on other discretionary items and big-ticket goods” such as cars, it said.

Meanwhile, auto credit availability for prospective vehicle buyers improved last month, Cox said in a June 10 statement.

In May, the company’s Dealertrack Credit Availability Index, which represents auto loan availability, rose to its highest level since April 2022. The overall approval rates for auto loans grew from 70.6 percent in April to 72.4 percent in May.

USMCA Deal

Last month, seven auto industry trade groups sent a letter to U.S. Trade Representative Jamieson Greer, asking the Trump administration to preserve the U.S.–Mexico–Canada (USMCA) trade agreement. 

A review of the pact is slated for July 1, when the three nations will meet to decide whether to extend the agreement. There is a possibility that the United States will pull out of the pact.

In the May 7 letter, the auto trade groups said the sector has made “significant investments” to comply with USMCA’s various regulations, such as labor value rules, regional content requirements, and steel and aluminum sourcing provisions.

“A majority of these investments have been made right here in the United States. These U.S.-based expenditures were made with the understanding that the agreement would remain a stable, trilateral framework and compliance with it would yield specific benefits,” the trade groups wrote.

“Splitting USMCA into separate bilateral agreements with significant differences in compliance and certification rules would introduce unnecessary complexity, increase administrative burden, create divergent regulatory regimes, and undermine the very supply chains the agreement was designed to strengthen.”

Talking to reporters on June 10, President Donald Trump said he was considering not renewing the USMCA.

“I’m not looking to renew it,” the president said. “We don’t need anything that Canada has, we don’t need anything that Mexico has, but they need everything that we have, and they have to treat us better.”