According to a recent report by KBB, the average American new car price fell in January to $49,388, down 0.4% from December's record high. Unfortunately, prices are still inflated by 5.9% from their places just a year ago with buyers spending $310 more on a car than MSRP in January.

Overall, this is good news because it's about time the new car market started seeing some relief. Used car market prices fell 14.9% in 2022 over 2021 and with these vehicles becoming better values as time goes on we're going to see new car prices follow right behind. Thanks in part to all the Federal Reserve rate hikes, 2023 is starting to look up for car prices.

KBB says that most of the non-luxury automakers like Chevrolet, Ford, and Honda, saw declines in prices between 0.3% and 4.9% month over month. Others like Toyota and Ram didn't fall in line though, with those brands seeing inflated prices of 2-5% over a sticker in January.

The real news is that luxury vehicles continue to have a field day. In January, almost 20% of all new car sales were luxury cars which is a record high. This is a big part of the reason that the average new car price is still so high. Mercedes and Lexus saw sales prices 1.4-4.8% over sticker showing great strength. Others like Audi, BMW, Infiniti, Lincoln, and Volvo weren't so fortunate though, with their cars actually selling for 1% less than MSRP on average.

Electric vehicles continued to hit record highs until last month in big part because automakers like Tesla and Ford decided to slash prices. New EV sales prices fell 5.4% compared to December, a $3,363 price drop. Tesla was practically having a fire sale with models like the Model Y dropping in value by $13,000 overnight. As one can assume, this did not go over great with buyers who had just purchased their cars, but those price drops are good for future sales.

Incentives are also slowly rising, with a 0.1% increase to 2.8% from December. This is still a far cry from the 8.6% incentives available in January 2021 before the new vehicle inventory decline, but it's a positive movement nonetheless.

As time progresses and the supply chains strengthen we're going to see a lot of improvement in prices and incentives. The one thing we don't see changing anytime soon is the number of luxury car sales. Luxury automakers have seen a boom in orders with their ultra-high-end divisions with many unable to keep up with demand. It's a great time to be Rolls Royce or Bentley that's for sure.