Are Car Prices Still Inflated

Car prices remain higher than pre-pandemic levels, but the market is stabilizing. While new SUVs still carry a premium, increased inventory and slowing demand are helping ease inflation. Savvy buyers can now find better deals with research and timing.

Key Takeaways

• Car prices are still elevated compared to 2019, but the steepest increases have slowed. New and used vehicle prices remain above historical averages due to lingering supply chain effects and high production costs.
• SUVs dominate the market, driving overall price trends. With over 80% of new vehicle sales being SUVs or crossovers, their pricing heavily influences the broader automotive market.
• New car inventory has improved, giving buyers more leverage. Dealerships now have more vehicles on lots, reducing the urgency to pay above MSRP.
• Used car prices are dropping faster than new ones. Increased trade-ins and off-lease returns are boosting used SUV supply, leading to more competitive pricing.
• Interest rates and financing costs add to the total expense. Even if sticker prices stabilize, higher loan rates mean monthly payments remain a challenge for many buyers.
• Timing your purchase can lead to significant savings. Shopping at the end of the month, quarter, or model year can help you negotiate better deals.
• Electric and hybrid SUVs come with higher upfront costs but long-term savings. While pricier initially, tax incentives and lower fuel costs can offset the difference over time.

Are Car Prices Still Inflated? A 2024 Reality Check

If you’ve been eyeing a new SUV lately, you’ve probably noticed that prices haven’t dropped back to what they were a few years ago. The question on every buyer’s mind: Are car prices still inflated? The short answer is yes—but the situation is improving.

During the pandemic, a global semiconductor shortage, factory shutdowns, and shipping delays created a perfect storm that drove vehicle prices through the roof. With fewer new cars available, demand outpaced supply, and dealers had little reason to negotiate. Buyers often paid well above the manufacturer’s suggested retail price (MSRP), especially for popular SUVs. Fast forward to 2024, and while we’re not back to pre-2020 levels, the market is slowly returning to normal.

Today, inventory levels are rising, consumer demand is cooling, and automakers are offering more incentives. That doesn’t mean prices are cheap—far from it—but the extreme inflation of 2021 and 2022 has eased. For SUV shoppers, this shift brings both opportunities and challenges. Let’s dive into what’s driving current pricing and how you can navigate the market smartly.

Why Are SUV Prices Still High?

SUVs have become the go-to vehicle for American families, and their popularity has kept prices elevated. But it’s not just demand driving costs—several underlying factors are at play.

Supply Chain Recovery Is Slow

While the worst of the chip shortage has passed, supply chains are still catching up. Some components, like advanced driver-assistance systems (ADAS) and infotainment units, remain in tight supply. This limits production capacity, especially for high-tech SUVs packed with features.

For example, the 2024 Honda CR-V and Toyota RAV4—two of the most popular compact SUVs—still face occasional delays due to parts shortages. When supply is constrained, automakers prioritize higher-trim models, which means base models may be harder to find or come with fewer options.

Increased Manufacturing and Material Costs

Steel, aluminum, lithium (for batteries), and other raw materials have become more expensive over the past few years. Automakers have passed some of these costs onto consumers. Additionally, labor costs have risen as manufacturers invest in automation and worker wages.

Even mainstream brands like Ford and Chevrolet have raised prices on their SUV lineups. The Ford Explorer, for instance, now starts around $38,000—up from $33,000 in 2019. That’s a 15% increase, far outpacing general inflation.

High Demand for SUVs

SUVs account for more than 80% of new vehicle sales in the U.S., according to industry analysts. Their versatility, higher seating position, and perceived safety make them ideal for families, commuters, and outdoor enthusiasts. This sustained demand allows automakers to maintain higher price points without worrying about excess inventory.

Even with more SUVs being built, the sheer volume of buyers keeps the market tight. Popular models like the Hyundai Tucson, Subaru Forester, and Nissan Rogue often sell out quickly, especially in higher trims with all-wheel drive and premium features.

New vs. Used SUVs: Where Are the Better Deals?

One of the biggest decisions buyers face is whether to go new or used. Each option has pros and cons in today’s market.

New SUVs: More Available, But Still Pricey

The good news? New SUV inventory has rebounded significantly. In early 2023, many dealerships had just a few weeks’ worth of stock. Now, some have two to three months’ supply, giving buyers more choices and negotiating power.

However, new SUVs are still expensive. The average transaction price for a new vehicle in early 2024 was around $48,000, according to Kelley Blue Book. For SUVs, that number is often higher, especially for midsize and full-size models like the Toyota Highlander or Chevrolet Tahoe.

That said, automakers are reintroducing incentives. You might find 0% APR financing, cash rebates, or lease deals—especially on outgoing model years. For example, the 2023 Kia Telluride is seeing discounts of up to $5,000 as dealers make room for 2024 models.

Used SUVs: Prices Are Falling

The used car market is where the real relief is happening. After peaking in 2022, used vehicle prices have dropped steadily. According to Cox Automotive, used car prices fell by nearly 10% in 2023 and are expected to decline further in 2024.

Why? More trade-ins and off-lease vehicles are hitting the market. As new car availability improves, people are upgrading, flooding dealerships with pre-owned SUVs. This increased supply is pushing prices down.

For example, a 2021 Toyota RAV4 Hybrid that sold for over $35,000 in 2022 can now be found for around $28,000–$30,000, depending on mileage and condition. That’s a significant drop and makes used SUVs an attractive option for budget-conscious buyers.

How Interest Rates Affect the True Cost of Owning an SUV

Even if sticker prices are stabilizing, the total cost of ownership is rising due to higher interest rates. The Federal Reserve’s rate hikes to combat inflation have made auto loans more expensive.

Monthly Payments Are the New Challenge

In 2021, it was common to get a 0% or 2% auto loan. Today, average rates are closer to 7–8% for new cars and 9–10% for used vehicles. On a $40,000 SUV financed over 60 months, that’s an extra $60–$80 per month compared to 2021.

This means that even if you find a “good deal” on an SUV, your monthly payment might still feel high. For example, a $35,000 loan at 7.5% interest results in a monthly payment of about $695. At 3%, it would be $627—a difference of $68 per month, or over $4,000 over the life of the loan.

Tips to Reduce Financing Costs

To offset high rates, consider these strategies:

• Make a larger down payment. Putting down 20% or more reduces the loan amount and total interest paid.
• Improve your credit score. A score above 720 can qualify you for lower rates. Pay down debts and check your credit report for errors.
• Shop around for loans. Compare offers from banks, credit unions, and online lenders before signing at the dealership.
• Consider a shorter loan term. A 48-month loan has higher monthly payments but saves thousands in interest.

When Is the Best Time to Buy an SUV?

Timing can make a big difference in what you pay. Here’s when to shop for the best deals:

End of the Month, Quarter, or Year

Dealerships often have sales targets to meet. Shopping at the end of these periods increases your chances of negotiation. Salespeople may be more willing to offer discounts or throw in extras like free maintenance or accessories.

New Model Year Arrivals

When 2025 models start arriving in late summer or fall, dealers will discount 2024 models to clear inventory. This is a great time to get a nearly new SUV at a lower price.

Avoid Peak Seasons

Spring and early summer are busy times for car buying, especially for SUVs. Demand is high, and deals are scarce. If you can wait, late fall and winter often bring better incentives.

Electric and Hybrid SUVs: Worth the Premium?

Electric and hybrid SUVs are growing in popularity, but they come with higher price tags. The average EV SUV costs over $55,000, compared to $40,000 for a gas-powered equivalent.

Long-Term Savings Can Offset the Cost

While the upfront cost is higher, EVs and hybrids offer savings on fuel and maintenance. Electricity is cheaper than gas, and EVs have fewer moving parts, reducing repair needs.

Additionally, federal and state incentives can lower the effective price. The Inflation Reduction Act offers up to $7,500 in tax credits for qualifying EVs, including models like the Ford Mustang Mach-E and Hyundai Ioniq 5. Some states add extra rebates, making these vehicles more accessible.

Consider Total Cost of Ownership

When comparing SUVs, look beyond the sticker price. Use online tools to calculate fuel, insurance, maintenance, and depreciation costs over five years. You might find that a hybrid SUV like the Toyota RAV4 Hybrid saves you money in the long run, even if it costs more upfront.

Conclusion: Smart Strategies for Buying an SUV in 2024

So, are car prices still inflated? Yes—but the market is shifting in favor of buyers. New SUV inventory is up, used prices are falling, and incentives are returning. While you won’t find the rock-bottom deals of the past, there are real opportunities to save with the right approach.

Focus on timing, shop both new and used markets, and don’t ignore financing costs. Consider total ownership expenses, especially if you’re looking at electric or hybrid models. And always negotiate—dealers have more flexibility now than they did two years ago.

The key is patience and preparation. Do your research, get pre-approved for a loan, and be ready to walk away if the deal isn’t right. With smart planning, you can drive home in the SUV you want—without overpaying.

Frequently Asked Questions

Are car prices expected to drop in 2024?

Car prices are stabilizing and may continue to ease slightly, especially for used vehicles. However, a return to pre-pandemic levels is unlikely due to higher production costs and sustained demand for SUVs.

Why are SUVs more expensive than sedans?

SUVs are more complex to build, use more materials, and are in higher demand. Their popularity allows automakers to charge premium prices, especially for models with advanced safety and tech features.

Should I buy a new or used SUV right now?

Used SUVs offer better value in 2024, with prices dropping and more inventory available. However, new SUVs come with the latest tech, warranties, and incentives—so it depends on your budget and priorities.

How can I avoid paying above MSRP?

Shop when inventory is high, avoid peak buying seasons, and negotiate firmly. Use online pricing tools like Edmunds or Kelley Blue Book to know fair market value before visiting a dealer.

Do electric SUVs really save money over time?

Yes, electric SUVs typically cost less to fuel and maintain. With tax credits and lower operating costs, they can be more economical over five to seven years, despite higher upfront prices.

Will interest rates go down in 2024?

The Federal Reserve may cut rates later in 2024 if inflation continues to cool. However, auto loan rates are unlikely to drop significantly until broader economic conditions improve.